Luong & 2 ors v Chinese Australian Services Society Co-operative Limited & 4 ors

Supreme Court of NSW|2007-12-07|Before: Brereton J

Background 2 The substantive proceedings, which were commenced by summons filed on 27 November 2006, concerned a dispute between the Pan faction and the opposing faction, as to numerous differences over the control and affairs of CASS, but particularly in respect of eligibility for active membership, which conferred voting rights. The matter was mediated, by the Hon T R Morling QC, on 5 October 2007 and again on 25 October 2007, in anticipation of a hearing which had been fixed for late November. As a result of the mediation, there was prepared and executed a document entitled "Issues Agreed Upon at the Mediation on 5 October 2007 and 25 October 2007" ("the Mediation Agreement").

3 The Mediation Agreement recorded that the plaintiffs and CASS had agreed upon a proposed new Rule 14, to be implemented and to take effect by 9 December 2007 or as soon as practicable, by means either of obtaining a consent order in the proceedings, or the passage of a special resolution at a Special General Meeting ("SGM") by 21 November 2007 if the Court declined to make a consent order.

5 Clause 9 of the Mediation Agreement provided for an agreed notice convening the AGM to be sent to each of the members of CASS listed in a document called Exhibit HP11, and the proposed new members referred to in clause 10 of the Agreement, advising of the alteration to Rule 14 and how those members may become an active member for the purpose of the 2006 AGM; a copy of the proposed notice was Annexure E to the Agreement. Clause 10 provided that 25 itemised applicants, and any other referred to in a list called Exhibit HP5 whose name was not on Exhibit HP11, could submit a new application for membership and pay the annual subscription to become an active member under new Rule 14 if they had joined CASS before 31 October 2006. There was a corresponding serial membership number, there was a record of a payment of a subscription prior to 31 October 2006, and there was a membership form in CASS's records.

6 Clause 11 made provision for the discontinuance of the proceedings in the event that the Court made an order for the amendment of Rule 14, an Organising Committee was convened, the AGM notice was issued, and the membership applications referred to in clause 10 were processed. It also made provision for an agreed joint statement to members (in the form of Annexure C to the Agreement), and correspondence to members following the adoption of new Rule 14 (Annexures D and E). Clause 12 provided that if the Registrar of Co-operatives did not approve the new Rule 14, or any of the conditions in clause 11 were not satisfied, the Agreement was of no effect.

7 The proposed new Rule 14 was set out in Annexure A to the Agreement, as follows: 14. In accordance with Part 6 of the Act:-

(a) To initiate, establish, adopt and manage community-based, non-profit, children, youth, family, aged and community services as well as supported accommodation in particular for the relief of poverty, distress, sickness, suffering, destitution, or helplessness of those people in the Chinese Community in Sydney

(b) In order to achieve active membership of the Co-operative, a member shall, provided that that they have been a member of the co-operative for in excess of 12 months, have (within a 12 months period immediately preceding the date of the Notice to Convene a General Meeting, or within a period from the beginning of the previous AGM and the date of the Notice to Convene a General Meeting, whichever is longer)

(i) served on the Board of Directors or a Committee of the Board or a Committee approved by the Board;

(ii) paid an annual subscription of $25.00 (or $5.00 in the case of a pensioner or a person aged 60 years or older) at least three (3) working days prior to the holding of a General Meeting for the calendar year 2007 and prior to 15 May in all subsequent years prior to the holding of a General Meeting, that member shall become an active member forthwith. Such annual subscription shall be applied in connection with the above primary activity of the Co-operative.

[The intent of this sub-rule 14(b)(ii) is that for the 2006 AGM proposed to be held on or about the 9 December 2007 any member of CASS may achieve active membership status by the payment on or before at least three (3) working days prior to the holding of a General Meeting, of an annual subscription of $25.00 (or $5.00 in the case of a pensioner or a person aged 60 years or older) whether or not the member also is or believes that he/she is an active member, but that for subsequent calendar years, no member is entitled to acquire active membership status under this sub-rule until the expiry of at least 12 months from the date of his/her admission as an ordinary member and no further annual subscription is due and payable until at least that 12 months membership has expired. For all years after 2007 the annual subscription must be paid before 15 May of that year.]

(iii) volunteered to participate in no less than one (1) day or two (2) half days in any one year, or in fact participate for no less than one (1) day or two (2) half days in any one year in a function or an activity organised by the Board of Directors or a Committee of the Co-operative.

(iv) used one of the currently approved services for a minimum period of five (5) weeks, such currently approved services being Counselling Services, Child Care Services, Aged Care Services, Disability Services and Migrant Settlement Services, or used any future services approved by the Board of Directors.

In the case of the alternatives (iii) or (iv) above being chosen, a member shall produce evidence in the form of tickets, receipts and/or other documentary material (including a written statement by the Co-operative from its records certifying the member's compliance with either alternative) with respect to any activity or function which the member has volunteered to participate in or has in fact participated in, or with respect to any approved services used by the member. Such evidence shall be produced to the Co-operative for verification no later than three (3) working days before the AGM for that calendar year.

8 A resolution to adopt such a rule would be an "active membership resolution" as defined by (NSW) Co-operatives Act 1992, s 117(2). Section 124 provides: 124 Prior approval of active membership resolutions

(1) An active membership resolution cannot be proposed at a meeting of a co-operative unless: (a) before the meeting, the Registrar has approved in writing of the terms of the proposed resolution, or (b) the active membership provisions which would result from the proposed resolution fall within guidelines approved of in writing by the Registrar before the meeting. (2) Before giving an approval under this section, the Registrar may require additional information from the proposers of the resolution for the purpose of deciding whether or not to approve of the resolution.

(3) If the Registrar refuses approval, the Registrar must inform the co-operative in writing of the reasons for the refusal.

9 On 8 November 2007, following correspondence with the Registrar and between the parties in which amendments to the form of the proposed rule annexed to the Mediation Agreement were proposed and agreed, the Registrar of Co-operatives approved proposed Rule 14 in the following form: 14. In accordance with Part 6 of the Act: -

(a) To initiate, establish, operate and manage community-based, non-profit, children, youth, family, aged and community services as well as supported accommodation in particular for the relief of poverty, distress, sickness, suffering, destitution, or helplessness of those people in the Chinese Community in Sydney

(b) In order to achieve active membership of the Co-operative, a member shall have (within a 12-month period immediately preceding the date of the Notice to Convene a General Meeting, or within a period from the beginning of the previous AGM and the date of the Notice to Convene a General Meeting, whichever is longer)

(i) served on the Board of Directors or a Committee of the Board or a Committee approved by the Board;

(ii) paid an annual subscription of $25.00 (or $5.00 in the case of a pensioner or a person aged 60 years or older) at least three (3) working days prior to the holding of the Annual General Meeting for the Co-operative's financial year ended 2006 in calendar year 2007 and prior to 15 May in all subsequent years that member shall become an active member. Such annual subscription shall be applied in connection with the above primary activity of the Co-operative. A member is only permitted to pay the annual subscription fee 12 months after they become a member of the co-operative.

(iii) volunteered to participate in no less than one (1) day or two (2) half days within the period specified in Rule 14(b), or in fact participated in no less than one (1) day or two (2) half days within the period specified in Rule 14(b) in a function or an activity organised by the Board of Directors or a Committee of the Co-operative.

(iv) used one of the currently approved services for a total period of five (5) weeks, such currently approved services being Counselling Services, Children's Services, Aged Care Services, Disability Services and Migrant Settlement Services, or used any future services approved by the Board of Directors for a total period of five (5) weeks or more.

For the purpose of sub-rule (iii) and (iv) above the Co-operative shall maintain at the office where the registers are kept a register of members who volunteered to participate and of members who have participated in a function or an activity for the purpose of sub-rule (iii) and of members who use the approved services of the Co-operative (iv).

10 On 9 November 2007, by consent, the Court made an order that Rule 14 of the Rules of CASS be amended in accordance with the new Rule approved by the Registrar, which was annexed to the order. The Court's orders were made pursuant to Co-operatives Act, ss 98, 99 and 102, the combined effect of which is, inter alia, to authorise the court to make an order regulating the affairs of the co-operative by amending its Rules where satisfied that its affairs are being conducted oppressively. However, an alteration of the Rules of a co-operative does not take effect unless and until it is registered by the Registrar [Co-operatives Act, s 113(1)]. The Registrar registered the amendment on 22 November 2007, whereupon it took effect.

11 Dispute then arose as to the operation of new Rule 14(b) in respect of the 2006 AGM to be held on 9 December 2007. The plaintiffs assert that in respect of the 2006 AGM only, the sole qualification for active membership was the payment of the annual subscription more than three days prior to the AGM, regardless of eligibility under any other provision of the Rule, and whether or not the person had been a member for more or less than 12 months. The competing contention is that the other limbs of Rule 14(b) have application in respect of the 2006 AGM, and that the requirement of 12 months prior membership is applicable.

12 It is questionable whether the present application is appropriately brought by Notice of Motion in the existing proceedings, or whether it ought to have been brought as fresh proceedings. However, (NSW) Civil Procedure Act 2005, s 73, provides that the Court in any proceedings has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether and on what terms the proceedings have been compromised or settled between them, and may make such orders as it considers appropriate to give effect to any such determination. The present dispute may properly be characterised as one as to the terms upon which the proceedings were compromised. Alternatively, the application might be supported as one in substance to vary the order on 9 November under the slip rule on the basis that it did not give effect to the true Agreement of the parties.

The Construction Question 13 The new Rule 14(b) took effect upon registration on 22 November 2007. [Co-operatives Act, s 113]. On the present issue I am concerned to construe that Rule, in the context of the Rules as a whole, bearing in mind that it is a public document on a public register and that its validity and effect depends on registration. In those circumstances, the Rule in the context of the Rules as a whole are the dominant consideration, and the terms of the Mediation Agreement - which do not form part of the Rules and are not registered - can play only a limited, if any, role in the construction of the Rule.

14 The Rule is unambiguous on its face. Having taken effect, there is nothing in the Rule as registered to suggest that it was to have only a limited or partial operation for the 2006 AGM, or that the commencement of some part of it was to be deferred. The plain structure of the Rule is that eligibility for active membership is established by fulfilment of any of the criteria listed in 14(b). There is nothing to suggest that the criteria other than (ii) were not to be applicable for the 2007 calendar year or the 2006 AGM. It is also plain that eligibility under Rule 14(b)(ii) depends on the person having been a member of the Co-operative for 12 months. And the Rules contain nothing to suggest that that qualification is not applicable for the 2007 calendar year or the 2006 AGM.

15 Accordingly, the plaintiffs fail on the construction question.

16 For present purposes, I proceed on the basis, without deciding, that a remedy in the nature of rectification could be granted. While the effect of an alteration of the Rules depends upon registration by the Registrar of Co-operatives, if the consent order of 9 November did not truly reflect the mutual intent of the parties, it might be open to the Court to set aside that order and, perhaps, to make another order in its place. Also, for present purposes, I will put aside the considerable practicable difficulties, including that as the hearing concluded after 4pm on Friday 7 December, there was no prospect of any rectified Rule being registered so as to take effect in time for the AGM on Sunday 9 December. It is possible, however, that a further extension of time for the holding of that AGM might have been obtained in such circumstances.

17 Any remedy in the nature of rectification would have required that the plaintiffs establish, to a high degree of satisfaction, that it was the common intention of the parties that the operation of new Rule 14(b) be limited in respect of the 2006 AGM in the manner for which the plaintiffs contend. For that purpose, the plaintiffs invoke, in particular, the notation contained in the form of Rule 14 annexed to the Mediation Agreement (but which was deleted from the Rule, following the correspondence with the Registrar): [The intent of this sub-rule 14(b)(ii) is that for the 2006 AGM proposed to be held on or about the 9 December 2007 any member of CASS may achieve active membership status by the payment on or before at least three (3) working days prior to the holding of a General Meeting, of an annual subscription of $25.00 (or $5.00 in the case of a pensioner or a person aged 60 years or older) whether or not the member also is or believes that he/she is an active member, but that for subsequent calendar years, no member is entitled to acquire active membership status under this sub-rule until the expiry of at least 12 months from the date of his/her admission as an ordinary member and no further annual subscription is due and payable until at least that 12 months membership has expired. For all years after 2007 the annual subscription must be paid before 15 May of that year.]

18 They also refer to Annexure B to the Mediation Agreement (the notice convening the proposed SGM, if required), which contained the following: Once the new Rule 14 if passed becomes operative, it will mean that for this calendar year 2007 only, any member may obtain active membership by simply paying an annual subscription of $25 ... it will be enabling members to have the benefits of active membership ... at the 2006 AGM next 9 December 2007. Such a person will not have to wait a full 12 months of ordinary membership before being eligible for active status which limitation however will apply for 2008 and succeeding years. Members who do not wish to make any such member's subscription payments may nevertheless achieve active membership by reference to 14(b)(iii) and/or (iv) which involves participating in CASS functions or using its approved services found the payment of further annual subscription. 19 However, that assists the plaintiffs only insofar as it suggests that the requirement for twelve months' prior membership was not to apply for the 2006 AGM. It is entirely consistent with sub-paragraphs (iii) and (iv) of Rule 14 applying at the 2006 AGM.

20 The plaintiffs also refer to Annexure C to the Mediation Agreement, the joint public statement, in which it was said "at the forthcoming AGM ... all those members who pay a membership fee of $25 ... will be active members ...". However, that does not suggest that persons who were otherwise eligible for active membership under the Rules would not be active members for the purposes of the forthcoming AGM.

21 The plaintiffs next invoke a letter dated 19 November 2007, from Mr Wong to members of CASS, which reported on the Court's order of 9 November, attached the new Rule 14, and continued: It will mean that for calendar year 2007 only, any member (whether or not that member is or believes that he/she is an active member) may attain active membership by simply paying before 4 December 2007 an annual subscription of $25. ... For all years after 2007 a member will achieve active membership without the necessity of being a member for 12 months by reference to the new Rule 14(b)(iii) and/or (iv) which involve ... or pay the annual subscription prior to 15 May in all subsequent years provided the member has been a member for 12 months. Members wishing to make new payment of the annual subscription before 4 December 2007 may do so at the CASS registered office ... . 22 Again, that assists the plaintiffs only insofar as it suggests that the requirement for twelve months' prior membership was not to apply for the 2006 AGM. It is entirely consistent with sub-paragraphs (iii) and (iv) of Rule 14 also applying at the 2006 AGM as an alternative basis of membership. Moreover, as a document brought into existence after the date of the Mediation Agreement and the Court Order, and does not emanate from a party, it is of very limited utility in establishing a common intent of the parties as at the date of the order.

23 None of the material relied on by the plaintiffs evinces an intention that the limbs of Rule 14(b) other than (ii) would not be applicable for the 2006 AGM. There is no evidence - not even in the notation to Rule 14(b)(ii) in Annexure A to the Mediation Agreement - of an intention that sub-paragraphs (i), (iii), and (iv) not apply with immediate effect.

24 Although the question whether it was the mutual intention of the parties that the 12 month membership qualification be suspended for the 2006 AGM is less clear, I am not satisfied, to the high standard required in a rectification suit, that it was the ultimate mutual intention of the parties that the operation of the 12 months membership qualification be suspended for the 2006 AGM. In the form of Rule 14 annexed to the Mediation Agreement, the "12 month qualification" appeared in the prefatory words of sub-rule (b) so as to govern all the criteria, not limited to paragraph (ii), and was not expressed as being inoperative for the 2006 AGM. Although the explanatory notation subscribed to paragraph(ii) emphasised that the 12 month qualification applied "for subsequent years", it did not assert that was inapplicable for the 2006 AGM. While the draft circular attached to the Mediation Agreement as Annexure B does assert that "at the 2006 AGM next 9 December 2007 … a person will not have to wait a full 12 months of ordinary membership before being eligible for active status which limitation however will apply for 2008 and succeeding years" - which lends some support to the plaintiffs' contention that, at least at the time of the Mediation Agreement, there was an intention that the 12 month qualification not apply for the 2006 AGM - the Mediation Agreement did not contain the final agreement of the parties: subsequently, and before the Court was asked by consent to make an order for the alteration of the Rules, changes were made, at the suggestion of the Registrar and with the agreement of all parties, to the proposed new Rule. For example, the form of order made by the Court did not include the notation previously subscribed to Rule 14(b)(ii). Because of these later amendments, the Mediation Agreement did not contain the final Agreement of the parties in respect of Rule 14, and the position retained at least some fluidity after 25 October, at least until the order was made on 9 November.

25 Given that there are indications both ways in the Mediation Agreement, and the mutual assent of the parties to the changes that were made after 25 October, I am unpersuaded either that it was the common intent of the parties that the 12 month qualification not apply for the 2006 AGM, or that if such was the intent of the plaintiffs, the defendants knew them to be mistaken. Accordingly, the plaintiffs fail also on the claim for rectification.

26 Mr Leong was, in May 2005, invited by Mr Pan, who was then the Chair of CASS, to become an alternate director. Subsequently, in anticipation of the AGM to be held on 21 May 2005, Mr Pan on 17 May asked him to complete a membership form and a nomination form, but to leave them undated. Mr Leong received a membership application form by facsimile, completed it, and returned it to Mr Pan by facsimile on 20 May 2005. At the AGM on 21 May 2005 he was elected an alternate director. On 8 June 2006, Mr Pan proposed that Mr Leong become secretary, and on 1 July 2006, Mr Leong was elected by the Board of CASS to be Secretary General.

27 In mid 2007, in the course of the dispute in the substantive proceedings, Mr Leong discovered that no receipt of his application fee had been recorded, so on 22 June 2007 he paid the relevant fees, for which he produces a receipt. He was issued a membership card, number 11831, on 22 June 2007. Mr Leong is listed in Annexure F to the Mediation Agreement as a member who is to be deemed active for the purposes of the SGM (if required). Mr Leong is also listed in Exhibit HP11.

28 On 29 November 2007, at a meeting of the Organising Committee, Mr Fong, Mr Pan, and Clifton Wong purported to decide that, as Mr Leong (and certain others) had not provided any evidence to prove their membership valid, they should not be included in Exhibit HP11. The other two members of the Organising Committee did not agree. On 30 November 2007, Mr Leong was informed of that decision and that he would not be permitted to attend the AGM. In those circumstances, the defendants, by Motion filed on 4 December 2007, seek an order restraining the plaintiffs and Clifton Wong from excluding or otherwise interfering with Mr Leong's attendance at the AGM.

29 The facts which I have recorded above establish that Mr Leong was at all material times a member of CASS. In any event, that he was listed in Exhibit HP11 establishes his membership so as to bind the parties to the Mediation Agreement for the purposes of the 2006 AGM. Whatever might have been the extent of the authority of the Organising Committee, it did not extend to permit the overriding of matters resolved by the Mediation Agreement from which it derived its authority. In particular, the Committee was not authorised to determine that Mr Leong should be removed from the list in Exhibit HP11, on which his name appeared.

30 Accordingly, I made order 5 in the defendants' Notice of Motion (that Mr Fong, Mr Pan and Clifton Wong be restrained from excluding the second defendant Peter Leong from, or interfering with his attendance at, the AGM). Claims 6 and 7 in the defendants' motion, to the effect that the plaintiffs be restrained from excluding certain other people from the AGM and that the Organising Committee was not authorised to resolve that those persons were not members of CASS, were not pressed.

Costs 31 The plaintiffs submit that the effect of their application was to obtain judicial advice for the benefit of CASS, and that for that reason CASS and not they should bear the costs.

32 The plaintiffs entirely failed on their motion. The defendants succeeded in a substantial part, but not all, of their motion. The argument advanced by the plaintiffs on the construction question was untenable. The main argument they advanced on the rectification question was also practically untenable. The defendants disclosed to the plaintiffs before the proceedings their counsel's advice in an endeavour to avoid litigation. The plaintiffs were not compelled to seek relief, and could have acknowledged the plain meaning of Rule 14(b) as registered. In respect of the plaintiffs' motion, there is no reason why the funds of CASS should be expended upon the plaintiffs' unsuccessful application. On the defendants' motion, no time was spent in evidence or argument on the issues which the defendants did not press.

33 I remain, therefore, of the view that the costs order previously pronounced is the appropriate one, and that the plaintiffs should pay the defendants' costs of both motions.

34 Accordingly, on 7 December 2007, I made the following orders: (1) Order that the plaintiffs' Notice of Motion filed on 3 December 2007 be dismissed.

(2) On the defendants' Motion filed on 4 December 2007, order that the second and third plaintiffs and Clifton Wong be restrained from by themselves, their servants and agents excluding or otherwise interfering with the second defendant's attendance at the Annual General Meeting of the first defendant to be held on 9 December 2007, or any adjourned date of that meeting.

(3) Order that the plaintiffs pay the defendants' costs of both motions.

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.

CITATION : Luong & 2 ors v Chinese Australian Services Society Co-operative Limited & 4 ors [2008] NSWSC 71

At a glance

Court

Decision date

Before

Source

Judgment (51 paragraphs)

Parties

Cases Cited (1)

Cited By (1)