Port of Melbourne Authority v Anshun Pty Ltd

REASONS FOR JUDGMENT This action has been brought under the Corporations Law. The further amended application alleges that the first respondent has acted contrary to the objects clause of its memorandum of association, contravening s 162(2)(b) of the Law. The respondents, by Notice of Motion filed 6 November 1997, seek an order, pursuant to Order 20 rule 2 of the Federal Court Rules, that the proceedings be stayed or dismissed generally, on the ground that the further amended application, filed by the applicant in court on 13 February 1998, and the amended statement of claim filed 24 October 1997 disclose no reasonable cause of action. In the alternative, the respondents argue that the proceedings should be stayed permanently on the ground of Anshun estoppel: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287; Ling v Commonwealth (1996) 68 FCR 180. The applicant, Mr Dunn, who appeared in person, holds a degree in accounting and financial administration, and is a registered tax agent in sole practice, providing accounting services and tax agency services to members of the public. The first respondent, the Australian Society of Certified Practising Accountants, is a company limited by guarantee. Individuals practising as accounting professionals (as broadly defined by the Society's memorandum) may join the Society. Members of the Society who satisfy its requirements are permitted by the Society to call themselves "Certified Practising Accountants" or "CPAs". The objects clause of the Society's memorandum of association lists 32 separate objects, including: "(1) To support protect and advance the character status and interests of the accountancy profession generally and particularly of Accountants being members of the Society. (2) To promote honourable practice to repress mal-practice to settle disputed points of practice and to decide all questions of professional usage etiquette or courtesy and all disputes between or amongst Accountants. (3) To consider all questions affecting the interests of the accountancy profession and to initiate promote watch over and consider and if necessary to petition Parliament and organize deputations in relation to measures for the protection and the advancement of the accountancy profession and of Accountants and general measures whether legislative or otherwise affecting the profession and the practice of accountancy and to procure improvements and promote uniformity in the principles methods and practices of accountancy. (4) To prescribe and adopt standards and classification of attainments and qualifications of Accountants for such purposes to conduct examinations and other tests in the theory and practice of accountancy and other subjects and to prescribe and receive fees for such examinations and tests and to grant diplomas and confer qualifications to designate the standard and status of Accountants and in particular of members of the Society. … (12) To carry on or engage in any other business or undertaking or project which may seem to the Society capable of being conveniently carried on in connection with or calculated directly or indirectly to further the objects of the Society. … (32) It is hereby declared and the intention is that the objects specified in each paragraph of this clause shall except where otherwise expressed in such paragraph be independent main objects and shall be in no wise limited or restricted by reference to or inference from the terms of any other paragraph or the name of the Society, and that the term 'Accountants' wherever used in these presents shall extend to and include Accountants Actuaries Auditors and Secretaries and any reference to accountancy or to the accountancy profession wherever appearing in these presents shall be deemed to extend to all activities from time to time commonly undertaken by Accountants." It will be appreciated that these objects are very broadly stated, and would justify a wide range of activities. The first object of the Society makes this particularly plain. The amended statement of claim gives particulars, by way of a list of eleven different "grievances", of those aspects of the Society's conduct, and of two of the Society's by-laws, which are alleged to contravene the objects clause of the memorandum of association. As a result of the matters complained of, Mr Dunn alleges he has suffered prejudice and damage in his practice as an accountant and tax agent. It should be noted here that, for the purposes of this motion, counsel for the Society was content to assume that Mr Dunn had standing under the Corporations Law to bring his claim. The dispute between Mr Dunn and the Society has not been confined to the present proceeding. On 29 April 1993, Mr Dunn filed an application in the Federal Court in which he alleged the advertising and promotional activities of the Society involved misleading or deceptive conduct, and misleading or deceptive representations, contrary to ss 52 and 53 of the Trade Practices Act 1974. He also alleged that the same by-laws of the Society as are complained of in the present proceedings, which place certain procedural and substantive restrictions on partnerships between members and non-members, constituted exclusionary provisions proscribed by ss 45(2)(a)(i) and 45(2)(b)(i) of the Trade Practices Act. That application was dismissed by Whitlam J (Dunn v Australian Society of Certified Practising Accountants [1996] ATPR 41,615), and an appeal to the Full Court was also dismissed (Dunn v Australian Society of Certified Practising Accountants, Lockhart, Hill, and Tamberlin JJ, unreported, 29 November 1996). Counsel for the Society submitted that an Anshun estoppel bars the present proceedings because, although brought under different legislation, the allegations in the amended statement of claim raise matters which could and reasonably should have been raised in the proceedings before Whitlam J. It is convenient to address first the argument of the Society that, assuming the facts alleged in the amended statement of claim, and that Mr Dunn has standing to bring this claim under the Corporations Law, the pleading nevertheless discloses no reasonable cause of action, so that the case should be dismissed under O 20 r 2(1). Order 20 r 2(1) of the Federal Court Rules provides: "Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding: (a) no reasonable cause of action is disclosed; (b) the proceeding is frivolous or vexatious; or (c) the proceeding is an abuse of the process of the Court; the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding." The power of the court under O 20 r 2 to dismiss an application summarily is one to be exercised only with great care, and in a very clear case, in accordance with the well known principles laid down by Dixon J in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. In the earlier case, Dixon J said (at 91-92): "The principles upon which that jurisdiction is exercisable are well settled. A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process. ... It is in my opinion of more importance to maintain the integrity of the principle that under cover of the inherent jurisdiction to stop abuse of process litigants are not to be deprived of the right to submit real and genuine controversies to the determination of the courts by the due procedure appropriate for the purpose .... ." Thus the litigant seeking an order from the court under O 20 r 2 to cut proceedings short bears a heavy onus. Recently, the test was stated as requiring it to be shown that the impugned case is "doomed to fail": Fejo v Northern Territory of Australia [1998] HCA 58, at para 26, per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ. See also Lonrho Plc v Fayed [1992] 1 AC 448 at 469-470; X (Minors) v Bedfordshire County Council [1995] 2 AC 633 at 693-694, 740; Webster v Lampard (1993) 177 CLR 598 at 602-603; and the discussion in Australian Building Industries Pty Ltd v Stramit Corporation Limited (Northrop, Lindgren and Lehane JJ, unreported, 1 December 1997). It should be remembered also that the court, instead of simply dismissing an application summarily, may strike it out under O 11 r 6, granting leave to replead. However, as the High Court (Mason CJ, Brennan and Toohey JJ) stated in Munnings v Australian Government Solicitor (1994) 120 ALR 586 at 589: "[A]lthough a plaintiff is often granted leave to replead if a statement of claim is struck out, there are some cases where the plaintiff so misconceives the cause of action that the action ought to be brought to an end (for example, Robertson v Commonwealth of Australia, High Court of Australia, 3 September 1985, unreported)". It is trite law that a respondent or defendant who seeks summary judgment on the ground that the statement of claim discloses no reasonable cause of action will do so, in general, as the respondents expressly do here, upon the assumption that all of the facts alleged in the statement of claim are true. Indeed, the applicant is entitled to have the matter put even slightly more in his favour. The right question is "whether it would be open to the plaintiffs upon the pleadings to prove facts at the trial which would constitute a cause of action": The Mutual Life & Citizens' Assurance Company Limited v Evatt (1970) 122 CLR 628 at 631, per Lord Diplock delivering the advice (by majority) of the Privy Council; Re Morris; Ex parte Donnelly (No 3) (Beaumont J, unreported, 15 August 1997). In West Wiltshire District Council v Garland [1995] Ch 297 at 305, the Court of Appeal accepted a statement of the issue which does not, I think, differ in substance: whether "within the reasonable bounds of the pleading" facts could be proved to support the claim, or whether it "is bound to fail for want of a cause of action". See also the exposition of the law by Millett J in Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 at 5; and Munnings v Australian Government Solicitor (1994) 118 ALR 385 at 388-389, (1994) 120 ALR 586 at 588-589. As I have said, the further amended application filed by Mr Dunn complains that, in a number of respects, the Society has acted contrary to the objects set out in its memorandum of association. The claim having been brought under the Corporations Law, as it existed prior to changes introduced by the Company Law Review Act 1998, the salient provision is s 162, the relevant parts of which read: "(1) A company's constitution may contain an express restriction on, or an express prohibition of, the exercise by the company of a power of the company. (2) Where: (a) a company exercises a power contrary to an express restriction on, or an express prohibition of, the exercise of that power, being a restriction or prohibition contained in the company's constitution; or (b) the memorandum of a company contains a provision stating the objects of the company and the company does an act otherwise than in pursuance of those objects; the company contravenes this subsection. … (5) Where, by exercising a power as mentioned in paragraph (2)(a), or by doing an act as mentioned in paragraph (2)(b), a company contravenes subsection (2), the exercise of the power, or the act, as the case may be, is not invalid merely because of the contravention. … (7) The fact that: (a) by exercising a power as mentioned in paragraph (2)(a), or by doing an act as mentioned in paragraph (2)(b), a company contravened, or would contravene, subsection (2); or (b) by doing a particular act, an officer of a company contravened, or would contravene, subsection (3); may be asserted or relied on only in: (c) a prosecution of a person for an offence against this Law; (d) an application for an order under section 230; (e) an application for an order under section 260; (f) an application for an injunction under section 1324 to restrain the company from entering into an agreement; (g) proceedings (other than an application for an injunction) by the company, or by a member of the company, against the present or former officers of the company; or (h) an application by the Commission or by a member of the company for the winding up of the company. (8) Where, if subsection (7) had not been enacted, the Court would have power under section 1324 to grant, on the application of a person, an injunction restraining a company, or an officer of a company, from engaging in particular conduct constituting a contravention of subsection (2) or (3), as the case may be, the Court may, on the application of that person, order the first-mentioned company, or the officer, as the case may be, to pay damages to that person or any other person." Sections 161 and 162 effectively abolish the ultra vires doctrine (in the sense which is concerned with acts by the company that are "beyond corporate capacity", rather than the broader sense sometimes used to describe unauthorised actions of directors: see s 160; Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 at 301, 367; Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 5 ACLC 725 at 733-734). A company is not required to have an objects clause in its memorandum of association: s 117(2) of the Corporations Law, states only that "[t]he memorandum of a company may state the objects of the company". Where a company does have an objects clause as part of its memorandum, it can no longer be said, as it could formerly, that the company lacks the capacity or power to take action outside those objects. Acts done (as interpreted according to s 159) by the company "otherwise than in pursuance of" the listed objects give rise to a basis for relief only in the limited circumstances outlined in s 162(7) and (8). In the present case, even if the applicant were to prove a contravention under s 162(2)(b), s 162(7) would clearly preclude a grant on that basis of some of the forms of relief which the applicant seeks. In particular, such a contravention would not give the court power to grant a declaration that any or all of the respondents are in breach of s 162(2), or to order that "the Respondent's license [sic] under S 383 of the Corporation Law be revoked." Nor would it enable the court to grant a positive injunction requiring the first respondent "to provide qualification for 'attainments' of accountants by examinations". The applicant also seeks: "An order that the Company and, it's [sic] Directors pay damages to Stephen Fraser Dunn the Applicant of estimated $116,000 being costs incurred by him in attempting to remedy the conduct of the Respondent under the Trade Practices Act 1974." The amended statement of claim does not disclose a basis for this relief, which would effectively overturn a costs order made by the Full Court against the applicant as the unsuccessful party in a different set of proceedings. The more important question is whether any of the "grievances" listed by the applicant in the amended statement of claim discloses a reasonable cause of action for contravention of s 162(2)(b) or otherwise. Can any of the conduct complained of, if proved, be characterised as "otherwise than in pursuance of" the Society's objects? The applicant's first complaint is that "[t]he Respondents have unfairly claimed exclusive right to the name 'Certified Practising Accountant'". Following this general assertion, the pleading goes on to state a series of reasons why the Society's claim should be found unfair: for example, it is stated that the "Respondent [Society] is not the only organisation that issues Certificates and Qualification"; that only some members have tertiary qualifications; that only some members have "relevant experience"; and that the words "Certified Practising Accountant are generic and do not belong only to the membership of the Respondent". The question under s 162(2)(b) is whether the Society has done "an act otherwise than in pursuance of " the objects stated in the memorandum of the Society. The conduct of the company need only fall within a fair construction of one of the objects stated in the memorandum, although, in the context of the whole document, a particular object may sometimes be read down. See Cotman v Brougham [1918] AC 514; and H A Stephenson & Son Limited (In Liquidation) v Gillanders, Arbuthnot and Company (1931) 45 CLR 476 at 490-492, per Dixon J, cases concerning the common law doctrine of ultra vires. On a fair reading of its first object, which may be summarised as the advancement of the interests of the profession and particularly of the Society's members, the adoption by the Society of a name for itself, and of a form of description by which its members may be distinguished, must fall within that object, or at the very least be incidental to that object, which is sufficient: The Attorney General v Great Eastern Railway Company (1880) 5 App Cas 473. The criticisms levelled at the use of the name "certified practising accountant" in the amended statement of claim would be relevant, not to whether that use falls within the bounds of the objects clause, but rather to whether it is an appropriate method for achieving those objects. However, that is not to the point. Contraventions of s 162(2)(b) are concerned only with acts done by a company "otherwise than in pursuance of " one of the listed objects. There is no requirement that the company must use the best method to achieve its objects, or that the company must actually achieve any or all of the objects: "So long as a company does not act ultra vires it is for the company to determine the scope of its business": The Mutual Life & Citizens Assurance Co Ltd v Evatt at 645. Nor, in general, is a contravention of s 162(2)(b) established because an act done in pursuance of one object may conflict directly or indirectly with some other listed object. The true question thrown up by a case where that happens will be whether the object relied upon really authorizes the act, or should be read down: H A Stephenson & Son Limited (ubi supra). The second area of complaint in the amended statement of claim relates to the way in which the Society conducts its "course of study", the subjects and requirements of this course, and the fact that the Society does not open its courses or qualifications to non-members. It is unnecessary to examine this complaint in any detail here. The matters complained of fall squarely within object (4) set out earlier in these reasons, and every particular allegation in "grievance four" relates only to how well or ill the Society attains the purposes of that object. Such complaints cannot ground a cause of action under s 162. The third aspect of the Society's conduct of which the applicant complains is its use of advertising and other promotional activities. The applicant lists a series of statements made in various advertisements, all of which eulogize the competence and skills of "Certified Practising Accountants" and proclaim the benefits of employing them. According to the amended statement of claim, these statements are "bogus" and "deceptive", so as to "contravene", as it is put, "all or any independent Objects of the Respondent and [they] cannot be reasonably seen to promote any independent Object under the Memorandum." Again, however, engaging in advertising is clearly conduct "in pursuance of" the Society's first object of promoting the "interests of … Accountants being members of the Society". Even assuming, for the purposes of this motion, that the statements complained of were misleading or deceptive, that would not mean that the act of publishing advertisements was done "otherwise than in pursuance of" the first object of the Society. The complaint of the applicant under the heading "grievance four" is quite difficult to understand. The amended statement of claim makes reference to object (10) of the Society, which is: "To sell or arrange for the sale and to act as agent or arbitrator for or in connection with the sale and the purchase of accountancy practices and businesses and to advise as to and fix the value or the consideration therefor and to value goodwill and other assets and property pertaining to such practices … and to assist in any way whatsoever in the sale and in the purchase of accountancy practices and businesses by members and by Accountants generally and to do so either gratuitously or for a fee or charge." The amended statement of claim goes on to suggest that "[t]he conduct referred to in all paragraphs of this Statement of Claim", and in particular the authorising of members to describe themselves as "CPAs" conflicts with "many" of the Society's objects and is "prejudicial to the Respondents' willingness to value the Applicant's Goodwill at a fair value, relative to any purchaser who may make enquiries with the Respondent regarding the purchase of the Applicant's business or Partnership should he decide to advertise that business for sale." The applicant enlarged on these statements in argument, complaining that the Society had refused to publish in its journal an advertisement submitted by the applicant seeking a partner for his practice. It is, however, clear that s 162(2)(b) does not impose a positive obligation on a company to pursue every aspect of every object in its memorandum. It refers only to "do[ing] an act otherwise than in pursuance of" the company's objects. The failure or refusal to act in a particular way in which the company is allowed to act under its objects cannot be a contravention of the section. The next set of allegations relates to by-laws 711 and 713 of the Society, which, the applicant complains, "unfairly [restrict] the Applicant's ability to compete equally for Partnership positions in Accountancy Practices". Without setting these by-laws out in detail, it is sufficient to say that they place restrictions, in the form of procedural and other requirements, on the ability of a member to enter into a partnership with a non-member of the Society, or to be employed by a non-member. They do not absolutely prohibit such partnerships. The applicant claims that these by-laws "contravene clause 3(3) of the Memorandum" because "they do not promote uniformity in the principles methods and practices of accountancy". But regulation of the practices of its members would, on a fair reading of the objects of the Society, fall within the first two of them. Under the heading "Grievances 6", the applicant outlines further complaints relating to promotional activity on the part of the Society, which "solicited work for CPA members only". As I have already stated in relation to the third set of grievances, it is clear that such promotional activities fall squarely within the first object of the Society. "Grievance 7" makes a series of allegations in support of the claim that the Society "does not monitor the ethics of its members employed in the Corporate sector", and "fails to have any quality assurance of the majority of its members in the Corporate sector". In discussing "Grievance 4", I have already held that the refusal or failure to do an act within a company's objects cannot be impugned under s 162(2)(b). The next matter complained of in the amended statement of claim is as follows: "8 Many of the Respondent's [ie Society's] Officers and Directors are seen to have 'conflicts of interests' with their involvement with a Company in business promoting certain Accountants and Accounting products, against their regular employment duties. 8a This does not promote honourable Practice and is not a good example for the community or the Profession." The pleading goes on to detail the employments of various officers, and the ways in which such employments are said to conflict with the objects of the Society. For example, the position of one officer, who is an academic, is said to conflict with "[a]cademic independence". With reference to officers of a company, s 162(3) states that an officer "who is involved in a contravention by the company of subsection (2) contravenes this subsection". What is required then (in the absence of a particular claim against a director under s 230 or a prosecution of an officer under some other section of the Corporations Law, neither of which is relevant here) is "an act otherwise than in pursuance of" the objects of the company. I am unable to perceive any way in which any of the allegations listed under grievance 8 could be characterised as such an act. The particular actions of the officers complained of, such as promotion of the Society within their respective employments, if seen as acts of the company (acting through its officers), would certainly fall within the first object of the Society. The ninth set of complaints raised in the amended statement of claim cites a number of ways in which the Society is said to have failed to take action in the interests of tax agents, or to have acted contrary to those interests. Specifically, the Society is alleged to have failed to lobby the government for more funding to supplement the inadequate funding of the New South Wales Tax Agents' Board, despite being aware of the need for more resources, thus failing to protect the interests of tax agents (in the removal from the register of agents no longer practising). The applicant also complains that the Society has allowed its logo to be placed on the cover of the CCH Macquarie Dictionary of Accounting, and "had editorial input" into that publication, which the applicant claims "contains many false definitions and omissions which did not protect, advance or support the interests of Tax Agents" (for example, by failing to define "Tax Agent" and incorrectly defining "Public Accountants"). As I have explained earlier in these reasons, a company's failure to act upon objects in the memorandum, or to do so in what someone else sees as the best way, cannot be impugned under s 162(2)(b). Under the heading "Grievance 10", the applicant details certain complaints relating to the way in which the Society handles its own accounts, culminating in the allegations that: "10i In publishing the above Accounts and explanations the Respondent [referring to the Society], has breached Australian Accounting Standards, constituting malpractice in breach of Object 3(2) and as such can not be seen to be pursuing all or any of the Objects as stated in the memorandum. 10j The Respondent's conduct is prejudicial to the Communities [sic] perception of Accountants to be competent professional persons and reflects badly on the Applicant's profession as a whole." A number of the objects of the society deal with the ability of the Society to run its own business. There is a general power under object (12) to - "carry on or engage in any other business or undertaking or project which may seem to the Society capable of being conveniently carried on in connection with or calculated directly or indirectly to further the objects of the Society." Other, more specific, clauses deal with particular transactions which the Society may engage in, including entering into partnerships or joint projects with other entities (object 14), acquiring and holding shares (object 15), dealing with real and personal property (object 22), and investing moneys of the Society (object 23). Keeping accounts is a necessary adjunct to any of these activities, in addition to being obviously incidental to the other more general objects of the Society. In keeping accounts, the Society is acting well within its objects clause, and it is simply not relevant to a claim under s 162 whether those accounts are properly kept or not. The final set of allegations to found a cause of action under s 162 relates to the conduct of the Society in the earlier proceedings between the same parties brought under the Trade Practices Act 1974, previously mentioned. It is unnecessary to examine these allegations in any detail. The matters pertaining to the conduct of the respondents in those earlier proceedings which are sought to be raised cannot, on any construction of s 162, found relief in new proceedings brought subsequently under the Corporations Law. The applicant has already pursued his right to appeal in respect of the decision of Whitlam J, and the matter has been finally dealt with by the Full Court. For the reasons outlined above, it is clear that none of the facts alleged by the applicant in the amended statement of claim, or which could be proved under it, can support a cause of action for a contravention of s 162(2)(b). Every aspect of the alleged conduct and actions of the Society and of the officers of the Society who are respondents in these proceedings clearly falls within one or other of the objects of the Society. (This is also true of the additional matters sought to be raised - though there was no application to amend further the amended statement of claim to plead those matters - when the hearing was re-opened, at the applicant's request, on 10 July 1998.) Whether that conduct and those actions are the most appropriate or the best adapted ways to achieve the Society's objects is irrelevant to the question raised by the statute: did the company do "an act otherwise than in pursuance of those objects"? My conclusion makes it unnecessary for me to consider whether the proceedings, if viable, should be permanently stayed on the grounds of Anshun estoppel. This is not a case where I should make an order striking out the application as amended and granting leave to replead. It is the kind of case, referred to by the High Court in Munnings v Australian Government Solicitor (ubi supra) where the applicant has "so misconceive[d] the cause of action that the action ought to be brought to an end." The motion succeeds and the application as amended should be dismissed under O 20 r 2 with costs.