Lianos v Order of AHEPA NSW Inc - [2020] NSWCA 340 - NSWCA 2020 case summary — Zoe

Lianos v Order of AHEPA NSW Inc - [2020] NSWCA 340 - NSWCA 2020 case summary — Zoe

Judgment

BASTEN JA: On 26 August 2020 this Court delivered a judgment in relation to a challenge to various steps taken by the first respondent, Order of AHEPA NSW Inc, (the incorporated association), by three dissenting members (the appellants). [1] The issue before the Court was whether persons who voted at a number of meetings on particular resolutions, including the adoption of a new constitution for the respondent, were entitled to vote. The reasons given by this Court on 26 August 2020 in "Lianos (no 1)" determined that two possibly alternative pathways for membership were in fact cumulative, with the result that 127 persons who voted at a meeting in November 2018, were not entitled to vote. [2] Lianos (no 1) concluded that the appeal should be allowed and the orders sought by the dissenting members should be made. However, the orders sought in the amended notice of appeal were not made: rather the dissenting members were directed to bring in short minutes of the orders to be made in lieu of the orders made by the primary judge. [3]
The only respondents to the appeal were the incorporated association and the NSW Commissioner for Fair Trading, who entered a submitting appearance. The Commissioner was presumably joined because the appellants sought to have corrected a register controlled by the Commissioner recording resolutions they asserted were invalid.
On 8 September 2020 the Committee of Management of the incorporated association passed a resolution appointing administrators. The appellants then required leave to pursue the proceedings (for the purpose of obtaining orders), pursuant to s 440D of the Corporations Act 2001 (Cth). That leave was opposed by the treasurer and secretary of the association, and by the members and executive committees of eight chapters of the association, who had not been joined as parties to the appeal.
On 26 November 2020 the Court handed down a further judgment, granting leave to proceed against the incorporated association (order 1), allowing the appeal (order 2), setting aside orders made by the primary judge and, in lieu thereof, making six declarations as to the invalidity of particular resolutions of the incorporated association (order 3). [4] Further, the incorporated association was ordered to pay the appellants' costs both of the appeal in the Equity Division (orders 4 & 5). Order 6 was in the following terms: "6. The above orders be stayed for a period of 21 days."
It may be assumed that the stay did not apply to order (1), granting leave to proceed, although that is not entirely clear. In any event, the stay was due to expire on Thursday, 17 December 2020.
On 11 December 2020 the eight chapters (the applicants), each of which is an incorporated association, filed a notice of motion seeking that they be joined as parties to the proceedings, in order to apply for an order that the Court reopen its judgment. (An amended notice was provided to the Court in the course of the hearing, correcting the names of the applicants.) If the application to reopen were granted, the applicants sought to have the Court set aside orders 2-5 made on 26 November 2020. Although not expressly stated in the notice of motion, that would lead to further orders being made, dismissing the appeal, so that the judgment in the Equity Division would be reinstated, and, no doubt, a different order made with respect to the costs of the appeal.
Relevantly for present purposes, order 4 in the notice of motion read as follows: "4 The stay [of] the orders made [on] 26 November 2020 in order 6 of those orders be extended until determination of this Notice of Motion."
On 14 December 2020 the application for a further stay was listed. Although it may not have been known to the parties at that stage, it is proposed that the motion be heard on Friday, 5 February 2021. Thus the proposed extension of the stay is for a period of seven weeks, which will fall almost exclusively within the Court vacation.
The appellants opposed the stay, relying on three propositions. First, they submitted that a stay should not be granted unless it were established that the applicants had an arguable case for reopening the judgment of this Court. That required that there be an arguable case to call further evidence. It was submitted that the applicants had failed to demonstrate that the criteria in s 75A of the Supreme Court Act 1970 (NSW) were arguably satisfied. That is, there was no evidence that the material which the applicants sought to adduce was not reasonably available to them at the time of the hearing in the Equity Division, or at the time of the hearing of the appeal in this Court.
Secondly, the applicants had not established a basis upon which they would be joined as parties at this late stage. There was no evidence that they were not aware of the proceedings, let alone that they only became aware of the proceedings after the judgment of this Court delivered on 26 August 2020. Rather, the Court should infer that they knew of the proceedings, but were content to stand by and let the incorporated association, as the active respondent, defend the proceedings.
Thirdly, the balance of convenience favoured refusal of the stay. If there were a choice to be made between the incorporated association continuing to operate either on the basis of the constitutional arrangements set aside by this Court's judgment, or on the basis of the regime approved by this Court, then the latter option was to be preferred. The applicants had not demonstrated that any irremediable prejudice would be suffered if that course were taken.
The appellants also challenged the proposition that the applicants should properly have been joined in accordance with the principles explained in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd. [5] They submitted the case was distinguishable. It is not necessary to determine whether such a claim would have merit as it was not relied on by the applicants.
In order to determine the appropriate course, it is necessary to identify why this Court imposed the stay when making orders on 26 November 2020. The Court set out the submissions made by the present applicants, identified as "the intervenors", in Lianos (No 2) at [31]-[39]. In brief, and perhaps not entirely accurately, the applicants' submissions may be summarised as complaining that the orders made by this Court had major structural consequences, which were inconsistent with the manner in which the various bodies had conducted themselves in the past, and had the effect of imposing a constraining hierarchical structure on those bodies, which had not before existed. The Court noted: "[39] Much of what is now being advanced on behalf of the Intervenors and the Eight Chapters Membership appears to be new contentions that were not advanced by the Association, based on material that was not before the primary judge or this Court. If there is documentary evidence that was not before the primary judge and, therefore, not before this Court, which may have a bearing on the issues in the proceedings, including the appeal to this Court, the appropriate course would have been to seek leave of this Court to adduce additional evidence on the hearing of the appeal. The hurdles to be overcome in obtaining such leave are well known. [6] "
The judgment then considered the orders proposed by the appellants, concluding that they were appropriate in that they reflected the reasoning in Lianos (no 1). The judgment concluded: "[53] Accordingly, the orders proposed on behalf of the Dissenting Members reflect quite fairly the conclusions reached in the Principal Reasons and, on the assumption that orders are to be made by the Court at this stage, the orders proposed by the Dissenting Members should be made. However, any question of possible reopening should be disposed of before the orders become effective. Conclusion [54] The Court should make orders and declarations as proposed on behalf of the Dissenting Members. However, the orders should be stayed for 21 days."
The apparent inference from this reasoning is that this Court did not intend its orders to have effect until the reopening application had been heard and determined. Unless it were clear that continuing to stay the orders would cause some level of prejudice, the purpose of the existing stay would only be effected by continuing its operation until the hearing of the reopening application. Given the time of year at which the issue arises, and given the fact that it was quite unlikely that the reopening application would be heard and determined by the last week before Christmas, there is much to be said for the view that the stay was expected to be continued if an application to reopen were made; as it has been made, the stay should be continued.
There are two factors which might weigh against that conclusion. First, there is the question raised by the appointment of an administrator and the possible circumstances of creditors of the incorporated association. However, the Court has been informed (without contradiction) that the association is not insolvent and that all creditors will receive full payment. Further, there is a proposed meeting of creditors, which was to be held yesterday, which was expected to vote upon the adoption of one of two proposed deeds of company arrangement. Once that vote was taken, the administrator would execute a deed within 15 business days, following which the affairs of the incorporated association would be returned to its committee of management. That event would be likely to occur in early January.
Whether members of the current executive would still hold office is not entirely clear. Declaration 3(f) made by the Court on 26 November declared that "between 1 December 2018 and 15 March 2019, the Association did not validly appoint any person to occupy the office of Secretary or Treasurer of the Committee of Management". Whether that affects the existence of the present executive, or some of its members, was not addressed on this application. However, the possibility that there might be no validly elected executive if the orders of the Court took effect would tend to favour a continuation of the stay.
The second matter of potential concern relates to the underlying dispute within the membership, however defined. A resolution passed by a general meeting in February 2019 authorised the committee of management to obtain funding, not exceeding $7 million, for a proposed development of facilities for the incorporated association, on land owned by the Bayside Council. If that motion were invalidated, there might be prejudice to the pending development proposal. On the other hand, if it is not declared invalid, and if it has not yet been acted upon, it seems unlikely that it will be acted upon before 5 February 2021. No party raised any particular issue about this resolution. Nor, indeed, was there any proposal that if the current executive were to regain control in early January 2021, there should be any form of restraint imposed on the activities of the executive pending resolution of the outstanding issues before the Court.
In these circumstances, the appropriate orders are as follows: 1. To the extent necessary, grant the applicants leave to file and rely upon the amended notice of motion provided to the Court on 14 December 2020. 2. Direct that the amended notice of motion, if not already filed, be filed forthwith. 3. Grant leave to the applicants on the motion to read the affidavit of Christine Louise Perry sworn 10 December 2020, subject to the following restrictions: 1. pars 16 (last sentence), 18(a) the words after "have not been heard",(c),(d),(e), 19 and 20(a),(b),c) be accepted as assertions, rather than as statements as to the truth of the assertions; 2. pars 25-28 be accepted as submissions. 1. Extend the stay ordered by this Court on 26 November 2020 with respect to orders 1-5 made by it on that date, until the determination of the reopening application. 2. Costs of the stay application to be the applicants' costs of the motion.