Considerations
87 Wilmar resists the declaration sought by the applicants and cross-claims for relief. Fundamentally, Wilmar says that the amendments to the Constitution adopted on 5 July 2016 discriminate against Wilmar which is unexplained by any reference to any of the considerations the applicants rely upon in support of the declaration they seek. Wilmar says that the amendments operate by selecting Wilmar (and other Mill Owner Members having given a Notice to Terminate) for differential treatment in a way which reduces the objectively neutral mathematical formula contained within the Constitution to a discriminatory set of facts which work oppression upon Wilmar. Wilmar says that because the discriminatory selection of it (and the other terminating Mills) is unexplained, the amendments operate in a way which is unfair, unfairly prejudicial to it and oppressive to it. Wilmar also says that inherent in the consideration of that which constitutes unfair prejudice, unfair discrimination and oppression, is the notion that the amendments work a fraud upon the power of the Members in general meeting to effect the amendments.
88 These propositions are amplified in the written submissions.
89 One aspect of these contentions has a necessary inter-relationship with the Constitution itself. Particular emphasis is placed upon Article 6 of the Constitution and the point made is that the emergence or existence of competition between a Mill Owner Member and QSL is not, as a matter of construction of the Constitution, a matter which justifies discriminatory treatment between Mill Owner Members. The proposition is that a close examination of Article 6 shows that differential treatment between Members by reason of their competitive posture or the consequences of emergent contestability provides no basis, consistent with the objects of QSL, for adopting amendments going to the appointment of Mill Owner Directors which discriminates between Mill Owner Members of QSL. Wilmar says that this is especially so when the relevant field of contestability concerns GEIS which, by definition, is Grower "economic interest" sugar. QSL, Wilmar, other Mill Owner Members, other marketers of export sugar will all be vigorously engaged in seeking to secure Grower nominations in the new environment. Wilmar makes this point throughout its submissions by reference to the various objects within Article 6 of the Constitution. However, the synthesis of the point is as I have just described it.
90 Wilmar says that when the Constitution is properly construed, having regard to the totality of the provisions (and I have quoted the relevant provisions in these reasons), it can be seen that Wilmar loses a vote of the kind and quality which it held under the Constitution before the amendments. Instead of being able to vote on the appointment of up to four directors (and control any vote on any of the directors), Wilmar is now reduced to being able to vote for only one director. Qualitatively (and quantitatively) this has the effect, it is said, of entrenching the BIM Mills with the result that although the amendments do not bring about a complete disenfranchisement of Wilmar (and other Mills choosing to terminate their RSSAs), it nevertheless remains the position that Wilmar and the other two terminating mills have been "singled out" for treatment in a way which is different from all other Mill Owner Members. Between the three Mill Owner Members who have elected to terminate their agreements, they now have a voting say in relation to the appointment of one director only. Wilmar also says that, correspondingly, the BIM Mills have entrenched their position having obtained the right to each appoint a director to the Board of QSL.
91 Wilmar also says that there is a question of construction in relation to the amendments because the definition of "Continuing Mill Owner Member" means a Mill Owner Member which has an agreement to supply raw sugar to QSL for sale to export markets which agreement has not terminated (irrespective of whether a Notice to Terminate that agreement has been given), completed or otherwise expired. Wilmar says that the only content of that agreement is that there must be an agreement to supply raw sugar to the company for sale for export markets and that no other content is identified. However, s 33B of the Real Choice Act gives a Grower, unless otherwise agreed, the right to cause the Mill Owner to sell GEIS to a nominated marketing entity and that, by and large, everyone is therefore likely to have an agreement to supply raw sugar to QSL for sale to export markets because, for the foreseeable future at least, QSL will continue to market raw sugar for export representing the GEIS component. Although the long term future might be different, the immediate position is otherwise.
92 More fundamentally, Wilmar says that competition for Grower nominations for GEIS is no basis for discrimination between Mill Owner Members for the purpose of the Constitution and this is especially so because Mill Owners do not have the economic equivalent of ownership in GEIS. Wilmar says that contestability for GEIS nominations between a field of market participants including Mill Owners and export desk sellers provides no justification for differential treatment, within the Constitution, of Mill Owner Members. Wilmar says that elevating this kind of contestability to a proper basis for differential treatment is explained on the footing of "camps" and "alignments" and those notions rise no higher than the relevance of the underlying competition itself which may or may not have informed decisions on the part of some Mill Owner Members to cease to be "aligned".
93 Wilmar chose to call no evidence in its case. Wilmar put in one document which is drawn from Mr Shayne Rutherford's affidavit. Mr Rutherford is the Executive General Manager of Strategy and Business Development for Wilmar and a Director of Wilmar. Nevertheless, no evidence was called from Mr Rutherford.
94 As to the evidence of Mr Gorringe for ISIS, Mr Basile for Bundaberg and Mr Lowry for Mackay, I accept their evidence. They answered all questions put to them frankly. There is no doubt that each of these entities conducts their business undertaking as profit maximising entities. There is also no doubt that they wish to take steps to exercise a right to each appoint a director to QSL with a view to seeking to inject business disciplines into the decision-making of that company so as to reduce costs and enable QSL, if possible, to continue to function on a structural basis which enables it to secure acceptable returns to Mill Owner Members and Growers in an environment in which its historical structures, put in place for the purpose of marketing 3.5 million tonnes of raw sugar, are seen, by the industry members, as inappropriate to a new market function of securing export sales for perhaps as little as 650,000 tonnes of raw sugar. That may prove to be untrue because QSL might, through whatever mechanisms it deploys in a contestable way, secure Grower nominations for GEIS which will mean that it will have more raw sugar to sell on the export market than 650,000 tonnes. Having had the benefit of their evidence, I am satisfied that each of those parties have approached the exercise of the power to make amendments for entirely proper purposes consistent with the evidence they have given.
95 I accept the evidence of Mr Beashel.
96 The question remains of whether, because the amendments discriminate against a Mill Owner Member who has, on the one hand, given a Notice to Terminate and, on the other hand, Mill Owner Members who have not, the amendments operate in a way which is properly described for statutory purposes as unfairly discriminatory, prejudicial or oppressive. The parties do not disagree about the law to be applied. The test is whether, objectively viewed, the hypothetical reasonable commercial bystander having regard to all the relevant circumstances would regard the amendments as unfair. A point of differentiation between the applicants and Wilmar concerns the authorities relied upon by the applicants. Wilmar says that authorities directed to proprietary entities have no proper application to an entity such as QSL which has the objects recited in its Constitution and is a company limited by guarantee.
97 QSL is a substantial trading corporation. It happens to have a particular structure based on its historical evolution. However, annually, it sells about 3.5 million tonnes of raw sugar on the export market and generates about $1.7 billion in revenue.
98 I accept that the question of whether the hypothetical reasonable bystander would regard the amendments as unfair within the statutory language engages an objective consideration by that hypothetical commercial bystander or hypothetical member of the circumstances which conditioned the amendments to the Constitution. Those amendments did not come out of the ether. The Constitution contains an existing method or protocol for the appointment to the Board of QSL of Mill Owner Directors. Under that system, votes were allocated in proportion to the quantity of raw sugar supplied to QSL for export. That system no doubt had rationality about it as one method because it reflected a degree of influence over the appointment of Mill Owner Directors linked to the extent of the economic interest of a particular Mill Owner Member in QSL measured by the volume of sugar it supplied to QSL. The power of appointment was, understandably, placed in the hands of those who supplied the most export sugar over the relevant three year period. Smaller Mill Owners were left with no meaningful say in the appointment of Mill Owner Directors. That method itself operated to discriminate between and amongst Mill Owner Members based on what might rationally be regarded as the greater or lesser interest held between and amongst those Mill Owners according to the proportion of the raw sugar they supplied to the corporation for export sale. Moreover, if a Mill Owner Member such as Heck supplied no raw sugar for export to QSL, its position was once further removed. A Mill Owner Member that has supplied no raw sugar to QSL for export sale has no say at all in the appointment of Mill Owner Directors.
99 I accept that this method cannot properly be described as neutral. It is simply one method adopted by the Constitution. It is commercially logical in the sense that it is based upon a voting formula referable to calculable numbers based upon volume. It brought about the result that Wilmar which supplied 60% of the raw sugar for export sale to QSL over the preceding three years was able to control 100% of the Mill Owner Director appointments or whether there would be any Mill Owner Director appointments. Those who supplied to QSL 40% of the raw sugar for export sale effectively had no control over the appointment of the four Mill Owner Directors notwithstanding that they were contractually bound to supply 100% of their raw sugar production for export sale, to QSL.
100 Such a system was also rational in a commercial sense because, in a particular environment, those Mill Owner Members over the preceding three years who had supplied the most raw sugar to QSL for export sale probably had the highest degree of interest in the future success of QSL's market performance as an export selling desk with associated risk management skills in finance, hedging and all of the other features required to function as a credible export seller of raw sugar. Those Mill Owner Members with that high degree of interest might rationally have a corresponding degree of influence over the appointment of Mill Owner Directors because they would have the most significant stakeholder interest in the future performance of QSL, managed and governed, as it would be, by its Board.
101 However, the future is not what it used to be, in this industry. Past commitment to QSL's future over three previous years or otherwise has no relevance to QSL's actual future. Once Wilmar, Tully and MSF gave a Notice to Terminate their respective RSSAs, the Mill Owner Members of QSL were confronted with two choices either of which or neither of which might have been best adapted to the changing circumstances. The first choice involved continuing with the existing system which would mean that a value judgement was being made that a Mill Owner Member which supplied more than 50% of the raw sugar to QSL for export in the preceding three years should continue to control 100% of the Mill Owner Director positions (or whether there would be any Mill Owner Directors) entirely regardless of, and detached from, its commitment to QSL in the future. The other choice involved selecting a new system which, objectively viewed, has the effect that each Mill Owner Member who remains committed to QSL for the future is entitled to appoint a director but only for so long as that commitment remains.
102 Mill Owner Members which remain committed to supporting QSL by seeking to make it capable (by restructure and other disciplines) of providing a competitive offering to the Growers with whom those continuing Mill Owner Members have relationships, and to the Mill Owner Members themselves, seek, on the evidence, to secure appointments to the Board of QSL to see whether QSL can endure in the new competitive environment.
103 The applicants say that unlike the 2015 amendments, the 2016 amendments which reflect the choice of enabling those Mill Owner Members who remain committed, in the future, to QSL, to appoint a Mill Owner Director so long as the Mill Owner Member remains committed to a supply relationship with QSL, does not disenfranchise those Mill Owner Members who have given a Notice to Terminate from 1 July 2017 because that class of Mill Owner Members nevertheless retains the right to vote on the appointment of one of the four director positions and in the event that Bundaberg, ISIS or Mackay gives a Notice to Terminate to QSL, they would be able to also vote on the additional director position.
104 I accept that, for the purposes of oppression, the question is not whether one particular approach or choice is correct or incorrect or whether one particular choice confers advantages on one group as opposed to another. The question to be asked is whether it is unfair to Wilmar to select the choices inherent in the new system reflected in the 2016 amendments over the old system. Would an informed reasonable hypothetical member or bystander have thought it unfair, objectively viewed, to adopt amendments which conferred benefits upon those Mill Owner Members who continue to support QSL as compared with those Mill Owner Members who do not and who have chosen to leave their support behind (with their substantial volumes essentially lost to QSL from 1 July 2017). It may be that QSL will, by its contestable conduct, secure nominations from Growers but as Mr Basile said, it may not. Those who stay "aligned" to QSL have a direct interest in ensuring that QSL is capable of conducting the remnant business undertaking in a way which is disciplined and useful to continuing Mill Owner Members and the Growers with whom those Mill Owner Members have historically had a strong relationship.
105 I also accept that the hypothetical fully informed reasonable bystander would be fully informed about the change to circumstances both in relation to the election by Wilmar, Tully and MSF to no longer supply raw sugar for export to QSL (subject to Grower nominations that might be won by QSL) and the changes in the environment after 1 July 2017. The question the hypothetical reasonable bystander or hypothetical member will ask themselves is this: Having regard to the preferences or choices before informed industry participants seeking to deal with QSL and its position in a forward-looking way, is it unfair, objectively viewed, to implement a system, by amendments to QSL's Constitution, that will remove Wilmar's absolute control over the appointment of Mill Owner Directors (or whether there will be any Mill Owner Directors appointed) in circumstances where Wilmar has chosen to take the volume of its sales away from QSL as from 1 July 2017, with no prospect of that volume ever coming back (subject to any Grower nominations QSL might contestably win), and allow other Mill Owner Members who remain to appoint directors and implement their decision-making over the management of the company for the future.
106 I am satisfied that no reasonable bystander would, objectively viewed, regard the amendments as unfair. I accept that in order to be oppressive, the reasonable bystander must consider, objectively viewed, the amendments to be unfair. It is not enough that minds might differ about the choices or that there are advantages and disadvantages in the choices made by the amendments or that the amendments might operate in a way which could be regarded as "harsh", although I do not regard the amendments as operating in that way. The question is whether the amendments are unfair objectively viewed having regard to all the relevant circumstances, from the perspective of the hypothetical reasonable commercial bystander.
107 On what basis can it be said that Mill Owner Members who have chosen to no longer have a future supply relationship with QSL, should retain the right to control the appointments of Mill Owner Directors to the Board of QSL? Plainly enough, in the period up to 30 June 2017, the departing Mill Owner Members still have, in a limited temporal sense, a fully engaged relationship with QSL. Disregarding that aspect of the matter was the vice inherent in the 2015 amendments.
108 I am satisfied that the statement of principle concerning the scope of the question to be answered by the hypothetical commercial bystander is reflected in these observations of Mason ACJ, Wilson, Deane and Dawson JJ in Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459 at 467, in these terms:
The answer to this contention is that no amount of sympathy for Wests can obscure the fact that the League was expressly constituted to promote the best interests of the sport and empowered to determine which clubs should be entitled to participate in competitions conducted by it. It was upon this basis that the clubs, including Wests, chose to incorporate. Indeed, the 1984 correspondence between Wests and the League which is in evidence plainly shows that Wests itself fully appreciated that it had no secure right to participate in the premiership competition. In truth, the Board was confronted with a conflict of immediate interest between Wests on the one hand and the League as a whole on the other and the exercise of the power conferred by Art 76 must necessarily be prejudicial to one or the other. Given the special expertise and experience of the Board, the bona fide and proper exercise of the power in pursuit of the purpose for which it was conferred and the caution which a court must exercise in determining an application under s 320 of the Code in order to avoid an unwarranted assumption of the responsibility for management of the company, the appellants faced a difficult task in seeking to prove that the decisions in question were unfairly prejudicial to Wests and therefore not in the overall interests of the members as a whole. It has not been shown that those decisions of the Board were such that no Board acting reasonably could have made them. The effect of those decisions on Wests was harsh indeed. It has not, however, been shown that they were oppressive or unfairly prejudicial or discriminatory or that their effect was such as to warrant the conclusion that the affairs of the League were or are being conducted in a manner that was or is oppressive or unfairly prejudicial.
109 At p 473, Brennan J said this:
The question here is whether the resolutions which were manifestly prejudicial to and discriminatory against Wests, were also unfair - that is, so unfair that reasonable directors who considered the disability the decision placed on Wests would not have thought it fair to impose it. The decision by the League's directors to reduce the number of competitors to twelve and to exclude Wests was in fact taken with full knowledge of the disability that that decision would place on Wests. But the directors also knew that the larger competition was burdensome to, and perhaps dangerous for, players and that a shorter season was conducive to better organisation of the Premiership Competition. The directors had to make a difficult decision in which it was necessary to draw upon the skills, knowledge and understanding of experienced administrators of the game of rugby league. The court, in determining whether the decision was unfair, is bound to have regard to the fact that the decision was admittedly made by experienced administrators to further the interests of the game. There is nothing to suggest unfairness save the inevitable prejudice to and discrimination against Wests, but that is insufficient by itself to show that reasonable directors with the special qualities possessed by experienced administrators would have decided that it was unfair to exercise their power in the way the League's directors did.
110 I am satisfied that the degree and measure of the difference in the commitment to QSL as between the BIM Mills and Wilmar, Tully and MSF is critical. It informs the objective view the hypothetical reasonable bystander would reach. No doubt, the BIM Mills are considering their position. A decision has to be made by 15 December 2016. Evidence has been given by Bundaberg, ISIS and Mackay. Plainly, in some cases, portions of the SEIS are being marketed through alternative marketers. Equally plainly, the BIM Mills are profit maximising entities. However, it cannot seriously be doubted, on the evidence, that the BIM Mills are committed to seeking to make QSL an effective enduring export seller of raw sugar. Plainly, some Mill owners have engaged with Alvean and Itochu partly because of an apprehension that QSL might not endure and partly because they need to obtain the services and experience of another exporter. However, fundamentally, the BIM Mills remain committed to QSL. In a contest between the degree of commitment as between Wilmar, Tully and MSF on the one hand and the BIM Mills on the other, it is perfectly plain that the BIM Mills have a commitment and the others do not, as to the future of QSL.
111 I am satisfied that all of these considerations and the emergence of the contestable environment for GEIS are matters which the reasonable bystander would take into account in determining whether the 2016 amendments are unfair in the statutory sense. I am not satisfied that that decision is informed by construction questions going to Article 6 of the Constitution.
112 Moreover, I am satisfied that the amendments, as a matter of construction, are reasonably plain. They contemplate a circumstance in which a Mill Owner Member which has an agreement to supply raw sugar to QSL for sale to export markets which agreement has not terminated (irrespective of whether a Notice to Terminate the agreement has been given) completed or otherwise expired, is a Continuing Mill Owner. The BIM Mills are entities which have an agreement to supply raw sugar to QSL for sale to export markets which satisfies the description in the definition and thus they are Continuing Mill Owner Members because they are Continuing Mill Owners. The term Original Continuing Mill Owner Members means the Continuing Mill Owner Members as at 30 May 2016 (Mackay, ISIS and Bundaberg) and who, in relation to each such Member: (a) continues to be a Continuing Mill Owner Member; and (b) has not given a Notice to Terminate in respect of their current agreement to supply raw sugar to the company for sale to export markets. The effect of the new Article 31 is that each Original Continuing Mill Owner Member may appoint one Mill Owner Director and remove any Mill Owner Director appointed by that Original Continuing Mill Owner Member and those Mill Owner Members who have given a Notice to Terminate have a right to appoint one Mill Owner Director.
113 I am satisfied that the construction and operation of the amendments is clear.
114 I am satisfied that the cross-claim is not made out. I am satisfied that a declaration ought to be made as sought by the applicants.
115 The first respondent is to pay the costs of and incidental to the proceedings.
I certify that the preceding one hundred and fifteen (115) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.