Szencorp Pty Ltd v Clean Energy Council Limited

BACKGROUND 3 The Council was incorporated on 24 August 2007 for the purpose of effecting the merger of two existing sustainable energy industry associations, the Australian Wind Energy Association ("AusWind") and the Australian Business Council for Sustainable Energy Inc ("BCSE"). The merger was implemented as a result of a Memorandum of Understanding made on 31 August 2007 between the Council, BCSE and AusWind. 4 The Memorandum of Understanding noted that the BCSE and AusWind were peak industry associations "representing a range of energy supply and demand side technologies" and that the objective of the merger was to ensure that the "sustainable" energy sector was represented by a single entity that clearly and articulately presented a uniform message to external stakeholders. The Memorandum of Understanding set out the provisions by which the Council, BCSE and AusWind were to implement the merger of the two organisations. 5 The members of BCSE and AusWind had been provided with an Information Memorandum which they had considered at a special general meeting of the members of each organisation. The members of each organisation had voted affirmatively to amalgamate the two organisations. A copy of the Information Memorandum was attached to the Memorandum of Understanding. 6 The Memorandum of Understanding set out the obligations, activities and conduct to be undertaken by the Council upon the merger. The Council agreed that it would undertake the following, amongst other undertakings: (a) commence operations using the principles and basis outlined in the Information Memorandum; (b) establish a limited and manageable number of technology directorates covering priority issues and in the different industry segments as outlined in the Information Memorandum; (c) develop and document policies that covered all sectors of the sustainable energy industry; (d) ensure that the current level of activities was maintained and advocate policy positions that were in the best interests of all the membership. 7 The reference in the Memorandum of Understanding to "supply and demand side technologies" is not a reference to "supply side" and "demand side" as those expressions are ordinarily used in an economic sense or in any economic context. Mr Szental, a director of the plaintiff, explained that the sustainable energy sector can be understood as being made up of companies and organisations on the "supply side" and companies and organisations on the "demand side". Companies and organisations on the "supply side" are concerned with the generation of sustainable energy for sale by energy retailers to individual consumers. Companies and organisations on the "demand side" are concerned with products and services to be used by individual consumers to reduce their use of energy or to use it more efficiently. An example of a "supply side" participant is a company which generates electricity. An example of a "demand side" participant is a manufacturer of photovoltaic cells for domestic use, for example, a solar panel which can be installed on the roof of a suburban house. 8 The Memorandum of Understanding provided for the assignment and novation of the assets and liabilities of BCSE and AusWind to the Council. The memberships in BCSE and AusWind were transferred to the Council from 31 August 2007. The current Board of Directors of the Council is an interim Board which was appointed by the BCSE and AusWind Boards following the merger. 9 The Constitution of the Council provides for the following classes of members: (a) sponsor members; (b) corporate members; (c) associate members; (d) network members; (e) supporters. Clause 9.5 of the Council's Constitution sets out the following criteria for membership classes: "(a) for Sponsor members, large corporate/businesses with a substantial level of involvement in the deployment of energy technologies and practices which contribute toward a sustainable greenhouse gas emissions profile for Australia (Industry Involvement) and are seeking to take a direct and substantial interest in the increase of such deployment; (b) for Corporate members, large corporate/businesses with a substantial Industry Involvement; (c) for Associate Members, small owner operated companies/businesses, small consultancies, research groups, educational institutions or other individuals or organisations who have an interest in Industry Involvement; (d) for Network Members, corporate or persons with solar PV accreditation interested in Industry Involvement only in relation to solar PV deployment; and (e) for Supporter membership, individuals who have made a significant, substantial and sustained contribution to Industry Involvement." 10 There are a number of provisions in the Information Memorandum relevant to the claims made by the plaintiff. Clause 2.4 of the Information Memorandum provided for a "Leaders' Advisory Council" in the following terms: "Sponsoring members will be able to participate on a Leaders' Advisory Council, which will meet regularly and will provide lobbying and advocacy support to the Board and the unified association's executive team. Specifically participation in the Leaders' Advisory Council will provide Sponsoring Members the following: > More direct input into policy development, and direct consultation regarding development of key strategic objectives and policy details; > Access to more timely, upgraded information on key industry issues and developments that may have an impact on your business, including briefings on key issues and developments, and reports on the results of lobbying campaigns; > Opportunities to engage with leading political representatives and other key policy makers; > Invitations to regular lunches and meetings arranged with leading political and Government officials." 11 Clause 2.5 of the Information Memorandum provided for "Technology Directorates" in the following terms: "It is important that each technology and area of common interest represented by a unified association has an opportunity to raise and progress issues specific to its sub‑sector. A 'directorate' structure is proposed to meet Members' needs for this technology‑specific representation. Participation or nomination of Members to one or more directorates is not compulsory. Directorates may form or dissolve as required around specific clusters of Member interest. The activities to be undertaken by specific Directorates will not be prescribed by the Board however the Board will be informed about these activities to ensure that they are consistent with a unified association's objectives. The Board and CEO are ultimately responsible for approving Directorate business plan and outputs. Initial directorates will include the following: > Wind Directorate > PV Directorate > Geothermal Directorate > Solar Hot Water Directorate > Bioenergy Directorate > Energy Efficiency Directorate > Energy Performance Contracting Directorate > Local Government Directorate > Environmental Markets Directorate Additional directorates may also be established in response to Members' needs, for example in areas such as hydro, distributed generation or cogeneration. …" 12 Section 3 of the Information Memorandum related to "the board and board's structure" and cl 3.1 in relation to the "role of the board" provided: "The Board will ultimately retain responsibility for the strategic direction of a unified association and it will delegate authority to the CEO and Executive Team to implement the business plan and deliver the advocacy strategy. In the development of policy and high level representation the CEO and the Board will take advice from and be informed by the views of the Members through the Leaders' Advisory Council and the Directorates." 13 Section 5 of the Information Memorandum related to "business plan and financial position" and it provided: "Once Members have approved the amalgamation, the CEO in conjunction with the Board will develop a business plan and budget for a unified association. The business plan and budget will allocate resources to effectively address both a unified association's overall objectives and the issues pertaining to specific technology sectors." 14 Section 6 of the Information Memorandum related to "organisational structure" and cl 6.2, headed "Policy Development and Advocacy", provided: "Whilst the Board has the final say on policy development, the development of policy and advocacy for a unified association will be undertaken through consultation involvement of its Members through a number of avenues. Members have the opportunity to contribute ideas and issues, and to network with fellow Members, through the Leaders' Advisory Council and a number of Directorates …" 15 Section 11 of the Constitution of the Council contained a number of provisions in relation to "Rights and Duties of Members". In particular, cl 11.3 provided for "Technology Directorates" in the following terms: "(a) The Board shall establish and provide for the operation (at its discretion) and cessation (at its discretion) of Technology Directorates to promote the technological development of a particular industry within the Principal Object. (b) All Sponsor Members and Corporate Members shall be entitled for no extra fee to join one (1) Technology Directorate of their choice and may join more than one (1) Technology Directorate(s) upon payment of an additional fee(s) as determined by the Board from time to time. (c) All Associate members and network Members shall be entitled to join one or more Technology Directorate(s) upon payment of an additional fee(s) as determined by the Board from time to time. (d) The activities of each Technology Directorate will be as agreed between the relevant Directorate and the Board." 16 Clause 11.4 of the Constitution provided for "the Leaders' Advisory Council" in the following terms: "(a) The Leaders' Advisory Council shall be comprised of those Sponsor members who nominate from time to time (and have not withdrawn that nomination) in the manner prescribed by the Board. (b) The Board shall ensure that the Leaders' Advisory Council will: (i) be provided with direct input into policy development, and direct consultation regarding development of key strategic objectives and policy details; (ii) access to key information on industry issues and developments that may impact on Council Members' businesses; (iii) opportunities to engage with leading political representatives and other key policy members; and (iv) opportunities to attend briefings, presentations and meetings with leading political and government officials. (c) Subject to this constitution, the Leaders' Advisory Council will not undertake any activities without the prior approval of the Board." 17 The interim Board of Directors of the Council comprises 13 directors. Five of the directors are directors of BCSE and five of the directors are directors of AusWind. One director is a director of both BCSE and AusWind and two directors are neither directors of BCSE nor AusWind. The Chair, Mr Richard McIndoe is the CEO of TRUenergy Australia Pty Ltd and is not a director of either BCSE or AusWind.

THE PLAINTIFF'S COMPLAINTS 18 The plaintiff's evidence was presented through Mr Peter Szental, a director of the plaintiff, who is also a director and Deputy Chair of the Council. Mr Szental's evidence related to a number of respects in which he claimed that the Council had not carried out its obligations under the Memorandum of Understanding or the Information Memorandum and that the merger had failed to achieve its objective of unifying members of BCSE and AusWind. 19 Mr Szental's complaints about the manner in which the affairs of the Council have been conducted fall into three general categories: (a) The Council has failed to represent adequately its members in the sustainable energy sector. The Board is dominated by representatives from the supply side and the Council has failed to develop policies reflecting the needs of members on the demand side; (b) The Council has failed to implement not only the vision and promises set out in the Information Memorandum but also its obligations under the Memorandum of Understanding. The Council has only recently established Technology Directorates. Almost all the former BCSE staff have left the Council and the Council has failed to provide member services; (c) The Council has failed to implement governance, transparency and financial controls and reporting mechanisms. Despite repeated requests from Mr Szental for detailed financial reports, budgets and cashflow projections, none of these documents have been provided to him in an adequate form. 20 The plaintiff's principal complaints can be summarised as follows: (a) Clause 4(e) of the Memorandum of Understanding provided that the Council would employ current BCSE and AusWind staff on equal or similar terms or conditions. Nearly all the staff who came from BCSE at the time of the merger have resigned from the Council and, according to Mr Szental, the Council did not employ new staff in key roles such as policy development or government affairs; (b) Clause 4(i) of the Memorandum of Understanding provided that the Council was to allocate, and direct, the necessary support for the Boards of BCSE and AusWind to facilitate the winding up of those organisations but those entities are yet to be wound up; (c) The Technology Directorates provided for in the Memorandum of Understanding and the Constitution of the Council were not established for a considerable period of time; (d) Clause 4(k) of the Memorandum of Understanding required the Council to ensure the ongoing support and operation of certain specific member interest groups which the plaintiff contended has not occurred; (e) Clause 4(l) of the Memorandum of Understanding obliged the Council to develop and document policies that covered all sectors of the sustainable energy industry. The plaintiff's complaint is that the Council has developed very few policies and those policies that it has developed relate substantially to supply side interests. Mr Szental stated that there has been a desultory effort to set up policy working groups to address "demand" and "supply" side policy issues. On 18 December 2007 the Board of the Council resolved to establish a policy and advocacy subcommittee which Mr Szental undertook to chair. That committee has only met twice and ad hoc meetings of the policy working groups have occurred from time to time, although Mr Szental contended that little policy development had occurred; (f) Clause 4(m) of the Memorandum of Understanding required the Council to ensure that the current level of activities and services was maintained and to advocate policy positions that were in the best interests of the membership as a whole. Mr Szental set out a number of instances which he contended showed the failure of the Council to provide promised membership services to members; (g) The Leaders' Advisory Council has not been established or constituted nor has it met. There has been a luncheon to which selected sponsoring members were invited to attend to meet politicians and also a breakfast meeting. However, no formal meeting of the Leaders' Advisory Council has occurred; (h) Clause 4(n) of Memorandum of Understanding required the Council to document and develop procedures covering the operation of the Board of Management, the Executive Committee and the Executive Officers of the Council and input to policy. According to Mr Szental, no formal Board or Management policy has been developed apart from a Code of Conduct which is presently being drafted; (i) The plaintiff complained that a lack of financial resources, corporate governance and management expertise had seen the credibility and resources of the Council decimated. Mr Szental had lost faith and confidence in the ability of the other directors and senior management to manage the affairs of the Council in the interests of its members. In particular, over a considerable period of time Mr Szental has raised concerns about the Council's budget and its financial position. From time to time Mr Szental sought financial information from the Chairman of the Council but this was not made available to him. 21 Having regard to the conclusions I have reached as to the characterisation of the plaintiff's complaints, the manner in which the Council's affairs and activities were being conducted as at the time of the final hearing and as to the nature of the relief sought by the plaintiff, it is not necessary to make specific findings in relation to the plaintiff's particular complaints. A number of the complaints were contested by the Council with varying degrees of cogency. Nevertheless, it is necessary to consider some of the plaintiff's complaints in order to understand the context in which the somewhat unusual form of relief sought by the plaintiff is placed. 22 The plaintiff had a particular complaint in relation to the financial position of the Council and the financial information which was available to, and supplied to, the Board. 23 Mr McIndoe acknowledged that in the period following the merger the Council experienced difficulties in establishing comprehensive financial and accounting records and that immediately post‑merger the Council was not performing in a satisfactory way. It was clear to Mr McIndoe in January 2008 that the financial records of the Council were unsatisfactory and completely inadequate. It was for that reason that he commissioned a report from an independent accountant, Ms Emma Stone of Stones Management Services ("the Stone Report"). The report, provided in February 2008, confirmed Mr McIndoe's view of the Council's financial records. 24 Mr McIndoe did not disclose or make available the Stone Report to the directors of the Council other than to Mr Jones, the Chairman of the Finance and Compliance Sub‑committee. He only brought it to the attention of the directors after the receipt of the second Stone Report in May 2008. Mr McIndoe's explanation for not doing so was that he commissioned the Stone Report for his own use. The second Stone Reported included the statement: "… a cash flow forecast beyond 30 June 2008 is not yet available and on this basis it is impossible to ascertain if the company will remain solvent for an extended period of time." This statement was important because an extraordinary meeting of the board of directors was held on 23 May 2008 at which a declaration of solvency of the Council was raised, discussed and passed. Mr Szental dissented. Up to this meeting, and indeed for some days after it, the second Stone Report was not made available to the directors. The statement was obviously relevant to the issue of the declaration of solvency yet Mr McIndoe said that the statement was not discussed at the board meeting although the issue of the cash flow forecast was discussed at length. 25 During May 2008 Mr Szental sought information about the Council's financial position and solvency from Mr McIndoe and he made his concerns known to other Board members. He did not receive the information he sought. 26 On 22 May 2008 Mr Jones, the Chairman of the Finance and Compliance Subcommittee, provided a summary of the Council's financial position to the Board by email. Mr Szental was dissatisfied with this summary as it did not respond to a number of issues he had raised earlier with Mr McIndoe. Further, the summary was based partly on the contents of the Stone report which had not been made available to Board members. 27 On 29 May 2008 Mr Jones circulated Ms Stone's supplementary report dated 8 May 2008 ("the Second Stone Report"). This was the first time that the details of the Stone Report had been provided to the Board. The report had been critical of the financial records and financial data of the Council. In particular, Ms Stone had noted that there was a lack of control in relation to financial data and transactions. In the Second Stone Report Ms Stone noted that most of the issues which she had raised previously had been attended to. In particular, and as detailed in par [24] above, Ms Stone made observations about the forecasting of the cashflow of the Council. 28 These financial issues culminated in the plaintiff, through Mr Szental, sending a letter to each of the directors of the Council on 17 June 2008. The letter set out in some detail Mr Szental's complaints about the lack of transparency in the management of the Council and several corporate governance failings. In the letter Mr Szental said that he wished to discuss these issues at the next Board meeting and he expressed the view that the Board should immediately appoint an expert insolvency accountant to examine the solvency of the Council and report back to the Board. 29 A Board meeting of the Council was held on 20 June 2008. At the meeting Mr Szental was handed a letter signed by 10 of the 13 directors seeking his resignation as Deputy Chair and as a Director on the basis that the Board had lost confidence in him. This action was apparently based on a claim that Mr Szental had breached Board confidences and had a conflict of interest, with which he disagreed. Mr Szental asked that the Board address some of the issues raised in his 17 June 2008 letter but his request was denied. At the end of the meeting the Chairman noted the plaintiff's letter of 17 June 2008 and said that because the meeting had run over its allotted time there would be no discussion of the letter. 30 On 24 June 2008 Mr Szental sent a letter to the directors of the Council in which he explained, inter alia, why he had written the letter of 17 June 2008. He called upon the Board to consider the issues raised in his letter and said that this should occur at a special meeting of the Board which he said should be convened by the Chair. 31 On the same day the Chair, Mr McIndoe, sent an email to Mr Szental stating, inter alia, that he would convene a meeting of the directors to discuss his letter and any response they wished to make. A meeting of directors of the Council was convened on 25 June 2008 for 27 June 2008 but Mr Szental was not invited to attend. The application in this proceeding was filed on 11 July 2008. 32 On 11 July 2008 Ernst & Young were retained to undertake the audit of the Council. 33 Although issues of the solvency of the Council were raised in the affidavit material filed in support of the application, it was not suggested in the course of the hearing that there is an issue as to the solvency of the Council.

CONSIDERATION 34 It is apparent that after the merger took effect there was a settling down period for the merged entities. There were hiccups along the way. The original chairman resigned in October 2007 and the original chief executive officer resigned at the end of March 2008. The development of policies in the sustainable energy field was an important issue for the Council. The development of these policies was slow in coming. For example, on 8 May 2008 the Council conducted a strategy day attended by its directors, and a further strategy day for staff members on 20 May 2008. At the latter meeting, the Council agreed upon a "Strategic Framework and Action Plan 2008-9" which sought to identify the strategic priorities of the Council. It is important to note that in relation to "influential policies" the immediate strategic priority identified was to re‑confirm positions on existing policies and accelerate planning on new policies. This did not occur for a considerable period of time. 35 The establishment of the Technology Directorates was also slow in coming. A draft of a proposed review of the Technology Directorates' structure was tabled at an April 2008 Board meeting of the Council. On 1 July 2008 the CEO of the Council sent a letter to members advising that the review of the directorate structure was complete and that seven directorates would be established. 36 Whatever may have been the position in the first seven or eight months of the Council's existence, since at least May 2008 the Council has been active in its liaison and relationship with Government. For example, in a letter dated 7 May 2008 the Minister for Climate Change and Water, the Honourable Penny Wong MP wrote to Mr McIndoe and stated, inter alia: "… my Department welcomes the role the Council is playing in putting forward ideas on design of the emissions trading system (ETS) and again I encourage you to continue to put your views forward". 37 The turnover of staff and the initial settling down issues faced by the Council were acknowledged in a letter sent by the Council's Chief Executive Officer to all members of the Council on 8 July 2008. This letter stated, inter alia: "Internally, we lost many familiar faces and, for a period of time, we were exceedingly short staffed. This, I know, caused some frustration and angst to members, as we not only seemed to be losing our intellectual property, but to many, it appeared that we had disappeared off the radar screen. I trust that you see us re‑emerging. … Out stakeholder communications have also been boosted. You will have received a letter from the Chairman, Richard McIndoe, and myself advising members of the strategy day that was held with the Board and the executive team in May. Repopulation of the staff was our key first step in going forward. Since May you will have received two newsletters updating you on activities and there is another coming mid July. You will also have noticed the significant increase in our presence in press articles. … In addition, to improve communications and input on technology specific issues, we have refreshed our directorate structure and meetings with the new directorates will commence in August." 38 Mr McIndoe has acknowledged that key components of the Council's operations are the two conferences that it convenes annually. One conference, the ATRAA 2008 Conference and Exhibition was held at the end of July and the beginning of August 2008 and the National Conference of the Council was scheduled to be held in November 2008. 39 On 16 July 2008 the Council sent a letter to all its members over the name of the CEO Ms Warrock which stated that the Council was financially secure. In particular, the letter stated: "We categorically assure you that the Council is now and has always been financially secure and that the organisation's governance practices are completely sound and proper. During the transition to a single entity, we have employed a number of independent accountants to repeatedly review our finances, budgets and cash flows, as well as maintain an active board‑approved finance committee." The evidence does not support the statement that the Council had employed a number of independent accountants to review repeatedly the Council's finances, budgets or cash flows. As Mr McIndoe was at pains to make clear, he had commissioned the Stone Report for himself; that was why he had not made the two Stone reports available to the other directors after they had been received. 40 On 14 July 2008 Mr McIndoe sent Mr Szental a reply to his letter of 24 June 2008. In that letter Mr Indoe enclosed "a complete set of financials including the rolling 12 month cashflow forecast as specifically requested". In the letter Mr Indoe rejected the request by Mr Szental that there be a solvency investigation by an independent accountant on the basis that the Council had commenced the standard end of year financial year audit process which would provide external verification of the finances of the Council. 41 A Board meeting was scheduled for 19 August 2008. Prior to the meeting the CEO circulated business plans of the Council to the directors for their consideration at the meeting. These business plans included the development of policies, the implementation of the Technology Directorates' structure and other aspects of the Council's activities. At the meeting the directors considered a report from its CEO in relation to an overview of the steps being taken by the Council in the furtherance of its objects. That report provided considerable detail in relation to the activities of the Council including: (a) Government briefings by the Council between 24 June and 8 August 2008 and future submissions which were due; (b) Lobbying activities of the Council in August and September which included lobbying in relation to a number of policies which impacted on the demand side of the industry; (c) The policy work it was undertaking; (d) An update on the revised Technology Directorates' structure; 42 The only Leaders' Advisory Council activities which have been held have been: · a luncheon on 19 February 2008 with the New South Wales Minister for Energy; and · a breakfast on 20 May 2008 with the Chief Executive of the United Kingdom BCSE. A breakfast was planned for October 2008 relating to the delivery of the Garnaut Review Final Report. 43 Draft audited financial statements and audit report and the final audited financial statements and the final audit report were provided by Ernst & Young to the Council on 30 September 2008 and distributed to the Board on 1 October 2008. The draft audited financial statements and audit report included a letter from the auditors to the directors of the Council which contained matters for consideration by directors. The letter stated, inter alia: "We found the financial controls and processes of CEC to be weak. General ledger reconciliations were not prepared on a timely basis. A number of the general ledger reconciliations contained unreconciled differences. As a consequence of this weak control environment we performed a substantive audit with particular emphasis on the balance sheet accounts at 30 June 2008." Section 4 of the draft audit report stated: "During the course of our audit we identified a number of potential internal control improvement opportunities. We bring these matters to your attention in order to assist with the improvement of the CEC internal control environment. We recommend: 1. Increasing qualified accounting and finance resources of CEC at and over year end in order to ensure the financial statements are closed on a timely basis and that financial statements are able to [be] prepared internally by the company. 2. Timely preparation of general ledger reconciliations for all balance sheet accounts on a monthly basis. 3. Review of general ledger reconciliations by CEO or CEO designate with finance experience. 4. Consideration of controls over, and appropriateness from a governance perspective, of AEPCA and PVPS liabilities. It appears that these organisations are external to CEC but are using CEC finance and back office resources. 5. Regular reconciliation of general ledger to management reporting. 6. Urgent review of GST and PAYG processes, including reconciliation and payment timing. 7. Establishment of accounting policy in relation to government grants." The final financial statements and audit report did not include this letter. 44 I am satisfied that the situation and conduct of which the plaintiff was complaining, after the merger was effected and throughout the first half of 2008 up to the time this proceeding commenced, has been ameliorated since July 2008. 45 After the merger was implemented there was a considerable settling down period during which there was significant staff turnover which had an impact on the activities of the Council generally, including development of administrative procedures, development of policies, implementation of financial controls and the development of governance structures. A number of the plaintiff's complaints about these matters were justified at the time the complaints were made. 46 A number of the activities to be undertaken by the Council identified in the Memorandum of Understanding were not implemented or carried out for some time. A number of the promises identified in the Information Memorandum as to how the Council's affairs would be conducted and the benefits that would be derived by members were not implemented or carried out for some time. 47 Whatever may have been the position at the time the application by the plaintiff was filed in the Court, a number of the matters of which the plaintiff complained at that time in the evidence in the support of the application have been attended to and the position has now changed. I refer in particular to the appointment of the auditors and the presentation of the auditors' report, the implementation of the strategy plan and the development and implementation of policies, the restructure of the Technology Directorates, the revival or renewal of the Leaders' Advisory Council, and acknowledgement and acceptance that financial issues needed to be addressed and have been addressed. 48 The plaintiff's claim that the Council has conducted its affairs in the interests of its supply side members to the exclusion or disadvantage of its demand side members has not been established. There is no evidence which supports this claim. 49 The plaintiff's case is put on the basis, pursuant to ss 232 and 233 of the Act, that the conduct of the Council's affairs is either contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, members of the Council. If I make a finding that any of those circumstances have existed and still existed at the time of trial, it is open to me to make any of the orders provided for in s 233(1). Pursuant to s 233(1), I am able to make any order that I consider "appropriate in relation to the company", including a number of specified orders. 50 The plaintiff's submissions raise for consideration the following issues: (a) have the Council's affairs been conducted, either contrary to the interests of its members, as a whole or in a manner which is oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member or members of the Council? (b) If so, was that conduct continuing as at the date of the trial and the date of judgment? (c) If so, what relief is open to the plaintiff, and is the relief it seeks appropriate in all the circumstances? 51 The Council's submissions may be summarised as follows: (a) the proceeding has been shown to be an abuse of process; (b) the relief sought by the plaintiff, (that an independent accountant make a report to members of the Council) may not be ordered by the Court; (c) the Court should not determine whether the plaintiff has established that the conduct of the Council is oppressive under any limb of s 232 of the Act; (d) the matters raised by the plaintiff do not constitute oppression or conduct contrary to the interests of the members of the Council as a whole. 52 I do not consider that the proceeding has been shown to be an abuse of process. The plaintiff's complaint, both before and after this proceeding was filed, has consistently been that the conduct of the Council's affairs has not been in the interests of the Council's members in a number of respects to which I have already referred. The plaintiff has sought to have that conduct brought to an end. The plaintiff sought relief which it considered might achieve the result that the conduct of which it complained would be terminated. That relief was sought in the alternative - if the conduct could not be terminated then the plaintiff sought the winding up of the Council on the just and equitable ground. 53 The plaintiff abandoned that claim at the commencement of the final hearing. The Council submitted that the plaintiff acknowledged that it had never been its purpose to wind up the Council but that submission does not accurately reflect the plaintiff's evidence. What Mr Szental said, in the course of the cross‑examination, was that the statement by the plaintiff's counsel in opening was accurate. The plaintiff's counsel said, in the course of opening: "… we will not be making a submission that the company should be wound up because that would not achieve the purpose to which the proceeding was brought and there now are some audited accounts which demonstrate that although there's no budget for the future and the future can't be certain, the immediate future is not at risk. And my client's purpose has always been to remedy the failure to pursue the objects of the company, not to bring it to an end." Mr Szental said that the issue of winding up the Council had been discussed over the last several weeks and that it had only been in the last 48 hours that a decision was finally made not to pursue the winding up of the Council as that was not in the long‑term interest of the Council and its members. What apparently weighed in Mr Szental's mind was that as a result of the audited accounts becoming available the immediate future of the Council did not appear to be at risk. 54 The Council then submitted that in seeking an order that will not remove oppression the plaintiff had commenced and continued the proceeding as a means of obtaining some advantage for which the proceeding was not designed or some collateral advantage beyond what the law offered: Williams v Spautz (1992) 174 CLR 509 at 526-7. The Council contended that the plaintiff's true purpose in bringing the proceeding was to obtain findings from the court for potential distribution to members of the Council. The Council relied on the following passages in Mr Szental's cross‑examination: "But isn't your position in this litigation that you want the court to order an independent report to be provided to the members and then you want the members in some fashion to consider that report?---I think an independent report from the court or the court findings would carry different weight to the proposition that you've been putting, which is basically that I am a sole dissenting member of the board, and I think that it would carry an independence and a weight that possibly I could never muster. It would also ‑ ‑ ‑ Though really it is - sorry?---And it would make findings that there are actual deficiencies. So really is the object of this exercise to get court findings rather than an independent report? ---The object of this exercise is to bring to the attention of the members that the management of the industry association up till now has been far from adequate and not in their best interests. I mean I have nothing to gain out of this other than to try and improve the benefits. I led three‑quarters of the members through the BCSE into this merger and I have an obligation to them and I'm trying to fulfil that obligation by trying to inform them that what they signed on for isn't what they got." 55 I do not accept the Council's submission. The plaintiff has brought the proceeding in order to have the manner of the conduct of the Council's affairs changed. It seeks to achieve this result by seeking certain relief - a report by an independent accountant to the members of the Council in relation to particular aspects of the conduct of the Council's affairs. For reasons to which I shall refer, I do not consider that that form of relief is appropriate in the circumstances of this case or that it will achieve a result of the type contemplated by ss 232 and 233. But that conclusion does not mean the plaintiff has been motivated by an improper purpose in commencing the proceeding. Its purpose in bringing the proceeding is to end a course of conduct. Accepting Mr Szental's evidence that the plaintiff commenced the proceeding to obtain findings by the Court which it could distribute to members does not mean an abuse of process. Rather, it means that the means by which the plaintiff is seeking to achieve its purpose is misguided and inappropriate. 56 The discretion committed to the Court by s 233 is very wide and unconstrained. In an appropriate case, a particular type of conduct of the affairs of a company might be eliminated or terminated by directing a particular person to report on particular aspects of the conduct of a company's affairs to its members or by a Court making particular findings as to the manner in which the company's affairs have been conducted. 57 The plaintiff may be misconceived as to whether the relief it seeks will end the conduct or oppression of which it complains. That misconception does not mean that it is seeking an improper collateral advantage in bringing the proceeding. The advantage sought by the plaintiff in the proceeding is to terminate the manner in which the Council's affairs have been conducted in a number of respects. Section 232 gives the plaintiff the opportunity to seek relief within the range of relief provided in s 233 of the Act. The appropriate relief to grant in any given case is a matter for the Court and the court must tailor that relief so as bring to an end the impugned conduct: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688, 742. 58 As I noted in par [21] above, I do not propose to make specific findings in relation to the numerous complaints made by the plaintiff. A number of the issues raised by the plaintiff were acknowledged by the Council with the addendum that they had been rectified and remedied by the time the proceeding commenced. I have referred to some of these issues in par [47] above. 59 The "contrary to the interests" provision now contained in subpar (d) of s 232 has a separate and distinct area of operation from the "oppression" provisions in subpar (e) of s 232. The manner in which a company is being administered and in which its affairs are conducted may fall within the category of conduct contrary to the interests of the company's members as a whole although it may not be described as oppressive, unfairly prejudicial to, or unfairly discriminatory against members of the company: Turnbull v National Roads & Motorists' Association Limited (2004) 50 ACSR 44 at 52, 57; Campbell v BackOffice Investments Pty Ltd (2008) 66 ACSR 359 at 400. (See also Re Spargos Mining NL (1990) 3 ACSR 1 at 42; Shelton v NRMA Limited (2005) 51 ACSR 278.) An example of such conduct may be found where a company is formed for the purpose of undertaking particular activities but the directors and management disregard those activities and direct the company into different commercial areas. 60 An essential feature of the "oppression" provisions in subpar (e) of s 232 is whether or not there has been commercial unfairness. The manner in which the Court should approach the issue whether there has been commercial unfairness was conveniently identified by Tamberlin J in Shelton v NRMA Limited (supra) as follows at 284-5: "It is not practicable to delineate the numerous ways in which oppressive conduct may be established. The court will generally look at the overall course of conduct and consider whether it is so unfair that reasonable directors would not consider it fair. If directors exercise a power so as to impose a disability or burden on a member that is unfair according to ordinary standards of reasonableness and fair dealing, then such conduct may be described as oppressive. The question is one of fact and degree for the Court to determine, having regard to the view the directors have formed themselves, and allowing for any special skill or knowledge possessed by the directors. The test of unfairness is objective: see Wayde v NSW Rugby League Limited (1985) 180 CLR 459 at 472 ("Wayde") per Brennan J; Morgan v 45 Flers Avenue Pty Ltd(1987) 11 NSWLR 573. The court should not take a narrow approach to cases of oppression. It is necessary for the court to come to a conclusion that there has been conduct unfairly prejudicial to or unfairly discriminatory or oppressive to a member before it makes an order to this effect: see John J Starr (Real Estate) Pty Ltd v Andrew (Australasia) Pty Limited (1991) 6 ACSR 63, and the authorities there collected at 65-67." 61 It is important to distinguish between issues that might give rise to commercial unfairness and issues that might give rise to differences in policy or administration of a company. In John J Starr (Real Estate) Pty Ltd v Robert R Andrew (Australasia) Pty Limited (1991) 6 ACSR 63, Young J set out a number of principles in relation to the interpretation and application of the oppression provisions of the Act. In particular, at 66-7 Young J said: "H. It is not oppressive for those in control of a company to insist upon the adoption of a policy on a matter of business which there are legitimate differences of opinion: Re Broadcasting Station 2GB Pty Ltd [1964‑5] NSWR 1648. … N. The mere fact that a member of a company has lost confidence in the manner in which a company's affairs are conducted does not lead to the conclusion that he is oppressed; nor can resentment at being outvoted; nor mere dissatisfaction with or disapproval of the conduct of the company's affairs, whether on grounds relating to policy or to efficiency, however well founded. Those who are alleged to have acted oppressively must be shown to have acted at least unfairly towards those who claim to have been oppressed: Re Five Minute Carwash [1966] 1 WLR 745 at 751." 62 The plaintiff's principal submission was that the Council had failed to perform the functions and carry out and implement the promises and undertakings set out in the Memorandum of Understanding and the Information Memorandum. In a number of respects, to which I have referred, the Council did fail for a period of time to carry out, implement and carry into effect the promises, provisions and undertakings set out in the Memorandum of Understanding and the Information Memorandum. The Memorandum of Understanding and the Information Memorandum and their contents were fundamental to the decision of the two organisations to merge into the Council. Effectively the Information Memorandum and the Memorandum of Understanding formed the factual sub‑stratum which justified the coming into existence of the Council. 63 I do not consider that the complaints raised by the plaintiff in relation to the affairs of the Council and the manner in which the Board and its executive officers have conducted the business of the Council amounts to or constitutes oppression of the members of the Council, and in particular the plaintiff, within the oppression provisions of subpar (e) of s 232. In short, the conduct of the Council's affairs has not been oppressive to, unfairly prejudicial to or unfairly discriminatory against any members of the Council. 64 The matters of which the plaintiff complains, taken either singularly or cumulatively, are not such as to constitute oppression or commercial unfairness as that expression has been construed and analysed in the authorities. That is not to say that the plaintiff's complaints have not had any substance. Some of the concerns the plaintiff and in particular Mr Szental had about the finances of the Council have been substantiated in part and certainly supported by the first Stone report which was commissioned by Mr McIndoe. 65 I can understand the concern Mr Szental had in relation to a number of the issues he raised in relation to the finances of the Council. But those matters, either singularly or cumulatively, do not constitute oppression in the sense that they gave rise to the availability of a remedy under ss 232 and 233 of the Act. 66 Although it may be said that for a time prior to the commencement of the proceeding the Council had engaged in conduct which was contrary to the interests of its members, in that it had not carried out the obligations it had accepted and undertaken to carry out in the Information Memorandum and the Memorandum of Understanding, that conduct had ceased prior to the commencement of the final hearing. 67 In the course of final submissions Senior Counsel for the plaintiff submitted that the Council ought to be condemned for its failure to meet the expectations of its members. However, s 232 is not a punitive provision but rather a remedial provision: Re Spargos Mining NL (supra) at 44. The remedy to be granted under ss 232 and 233 is not to punish or to condemn but rather to remedy and end such oppression as has existed or such conduct which has arisen. 68 Senior Counsel for the plaintiff explained the concerns of the plaintiff in response to a question I put to him when he drew my attention to the fact that in the audited financial statements for the year ended 30 June 2008 there was a significant variation in the figure shown as the surplus between the draft financial statements and the final financial statements. The Income Statement in the draft financial statements showed a net surplus for the period ended 30 June 2008 of $666,448 whereas the Income Statement in the final financial statements showed a net surplus of $1,074,464 for the same period. I asked Counsel how he put the variation on the issue of oppression. Counsel responded: "Your Honour, it doesn't constitute oppression in itself, the clause starting with the financial records, but it's consistent with a company that's not paying attention to its objectives and its data, which is included to have good governance and financial controls. We say it's consistent with an organisation that simply isn't effectively pursuing its objectives and properly conducting its affairs. But in itself, it doesn't constitute oppression and as it doesn't disclose insolvency it isn't a ground we rely upon for winding up. We don't pursue winding up. But, your Honour, it's also consistent with a course of conduct with not providing documents which ought to have been provided. When they're requested they're still not provided, let alone within a reasonable time. So, it's consistent with the other complaints we make and supportive of the proposition that confronted with the failure to properly conduct the company and pursue its objects and involve members in the way that had been contemplated and then failure to disclose financial information to establish the basis upon which it could fund the activities it was supposed to pursue or any budget for the business plans that had been produced, Mr Szental was really left … He either walked away, saying well it doesn't matter that this company is not being conducted properly, it doesn't matter that it's not pursuing its objectives, it doesn't matter that the demand side policies aren't being developed and advocated. It doesn't matter that there's a process by which there is a selection of representatives not based on any procedure or structure to participate in briefings and advocacy. He could do that, that would be an easy thing to do. Or he could do it really as the only effective form of proceeding that he could bring, which is this proceeding, to attempt to remedy those deficiencies, which is what he's done." Mr Szental's concerns were understandable but they do not warrant a finding of oppression. 69 Further, by the commencement of the final hearing the substantive matters complained of by the plaintiff had been attended to by the Council. That consequence gives rise to the question as to whether it is open to a court to grant relief under s 233(1) when the conduct complained of, although in existence at the time the proceeding was filed, is no longer continuing as at the date of the trial or thereafter. 70 The power to grant relief under s 233 is very wide and the specific types of orders set out in s 233(1) are inclusive rather than exclusive. However, in considering what remedies should be made available to a party seeking relief under ss 232 and 233, it is necessary to consider the appropriateness of the remedy as at the time of the trial, and not simply at the time the application to the Court for relief was filed. Notwithstanding the width of the discretion in s 233 as to the relief which may be granted, the relief to be granted should be such as to terminate or remove the oppressive conduct or the conduct which is contrary to the interests of the members of the company. As Young J put it in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 at 742: "The flavour of the section also is that the court is only to give the remedy which removes the oppression. Note the remedy in fact given in Re H R Harmer Ltd [1959] 1 WLR 62 at 68. Thus it is not enough merely to find oppression and then proceed to find some remedy that might bring peace to the company generally. The court should only grant the remedy that removes the oppression found." 71 The proposition that the purpose of granting a remedy under ss 232 and 233 is to bring to an end the conduct or oppression of which complaint is made was explained by Giles JA in Campbell v BackOffice Investments Pty Ltd (supra) at 386-7: "The predecessors to ss 232 and 233 were introduced in the United Kingdom as s 210 of the Companies Act 1948 (UK), as a means of giving an aggrieved shareholder a remedy when winding‑up on the just and equitable ground would be too harsh. They enabled orders by which the oppression came to an end with the shareholder remaining a shareholder (as in Re H R Harmer Ltd [1958] 3 All ER 689; (1959) 1 WLR 62) or came to an end through the shareholder being brought out as a shareholder (as in Scottish Cooperative Wholesale Society Ltd v Meyer [1959] AC 324; [1958] 3 All ER 66 (ScottishCooperative)). That legislation was adopted in Australia, and has since been significantly amended to the form earlier set out. There are more widely available statutory remedies, but historically the point of granting a remedy is to bring an end to the oppression - as Powell J said in Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588 at 620; 2 ACSR 553 at 566 "if it be possible, to bring the 'oppression' to an end without recourse to a cure the effects of which would, in many cases, be worse than the disease"." See also per Basten JA at 397; Young CJ in Eq at 430. 72 Given that the purpose of granting a remedy under ss 232 and 233 is to bring to an end the conduct complained of, what is the situation if that conduct, in existence at or prior to the commencement of the proceeding, has terminated by the time of trial? 73 The general trend of authority is that it is open to a court to grant relief under s 233(1) of the Act notwithstanding the fact that at the time of the trial or the making of an order the conduct or oppression complained of is not continuing. 74 A considerable number of authorities in this context were considered by the members of the Court in Campbell v BackOffice Investments Pty Ltd (supra). I consider that the appropriate approach to take is that expressed by Giles JA in Campbell v BackOffice Investments Pty Ltd (supra) at 389: "In my opinion, it is not necessary that the conduct complained of be continuing at the time the court considers making an order. Rather, claimed relief founded on conduct which is no longer continuing may be refused, but will not always be refused, in the exercise of the discretion, and the discretion adequately allows for the logicality to which Hamilton J referred [in Bessounian v Australian Wholesale Mortgages Pty Ltd [2007] NSWSC 35]." 75 Basten JA relied on the decision of the Privy Council in Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] 4 All ER 164 as authority for the proposition that "neither the occasion nor the purpose of an order under s 233 need involve continuing oppressive conduct" (at 404). 76 However, Young CJ in Eq took the view (at 432) that "the authorities still require one to show continuing oppression at the date of hearing unless one is complaining about an act in the past of a director or other controller of the company which has a continuing effect". 77 As the Council had attended to the substantive matters complained of by the plaintiff by the commencement of the final hearing, there is no conduct which needs to be the subject of an order or relief to operate prospectively. In any event, I do not consider that the relief sought by the plaintiff is an appropriate form of relief either in the circumstances of this case or for the purposes of satisfying s 233 of the Act. 78 The relief sought by the plaintiff is that an independent person from one of the major four accounting firms be appointed to prepare a report to the members of the Council as to the Council's compliance with its obligations under the Memorandum of Understanding and the Information Memorandum, as to the adequacy of the Council's financial records and its solvency, and as to the extent and adequacy of the policies, mechanisms and procedures of the Council concerning corporate governance, reporting to the board and financial record‑keeping, budgeting, forecasting and reporting. Further, the plaintiff seeks that the independent person provide recommendations as to what changes should be made to such policies, mechanisms and procedures. 79 There are a number of criticisms or objections to this form of order of relief. Such relief leads nowhere. It does not resolve or remove the conduct complained of by the plaintiff or the acts upon which it relies for the purpose of complaining about the conduct of the Council's affairs. The matters upon which the independent person is required to report are not solely accounting or financial matters and extend beyond his or her probable expertise and experience. In particular, compliance with the Council's obligations under the Memorandum of Understanding and the Information Memorandum are not matters appropriate for determination by an accountant. 80 The relief sought by the plaintiff was predicated upon s 233(1)(j) of the Act which empowers the Court to make an order "requiring a person to do a specified act". However, the relief sought by the plaintiff is not, in my opinion, aptly described as requiring a person to do "a specified act". Rather, the plaintiff is seeking an order that the independent accountant undertake an enquiry and report to the members of the Council. 81 The fact that an order such as is sought by the plaintiff has not been made in any previous proceeding is no reason to refuse the relief for that reason. The discretion granted to the Court under s 233(1) is very wide and, as I noted earlier, it is not restricted to the forms of order set out in subs (1) of s 233. As I observed earlier, that section empowers the Court to make "any order" that it considers "appropriate in relation to the company". Nevertheless, I consider that the order sought is not appropriate in relation to the Council. 82 The plaintiff referred to three cases in respect of which it appeared to submit that a court had made an order requiring a person to do a specified act or thing. However, the circumstances in each of those cases was quite different from the circumstances presently before me. In those cases, the orders made were specific and did not involve a wide‑ranging enquiry or investigation and report of the type sought by the plaintiff. 83 In Ghabrial v Romolly Pty Ltd (1991) 5 ACSR 611 the order made required the directors to appoint a quantity surveyor to determine a particular issue, namely how much of the costs of construction were attributable to matters for which shareholders were solely responsible and the cost of other construction work which was for the benefit of all the shareholders. 84 In Sypkes Securities v Jeugny Pty Ltd (1991) 4 ACSR 668 the Court had made an order that the company provide accounts to one of its shareholders. The shareholder sought a further order that the company provide answers to certain questions about the accounts. Cummins J granted the order and said at 673: "… What is being sought is not a matter of opinion or a matter which properly could be characterised as treatment of accounts. Matters of opinion and matters of treatment properly are the subject of board consideration and determination. But antecedent to matters of the formation of opinion and the decision as to treatment is the supplying of information. What the plaintiff seeks here is factual information. I consider the plaintiff is entitled to be informed of relevant factual matter, being a corollary of Hampel J's order and antecedent to the formation of board opinion or decision as to treatment, before attending a board meeting wherein those decisions might be reached. It is entitled to attend the board meeting on a factually informed basis." In Hogg v Dymock (1993) 11 ACSR 14 an application for an interlocutory injunction was refused. The judgment does not appear to have any relevance to the issues before me. 85 I do not consider that the relief sought is appropriate. As I pointed out earlier, it resolves no issue as to the conduct of the Council nor any issue which might conceivably fall under the heading of "oppression". It brings nothing to an end; rather, it perpetuates the issues raised by the plaintiff. 86 The application will be dismissed. The plaintiff should pay the defendant's costs of the proceeding. I certify that the preceding eighty‑six (86) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

Associate: Dated: 2 February 2009 Counsel for the Plaintiff: D G Collins S.C. and S A Burchell

Solicitors for the Plaintiff: Arnold Bloch Leibler

Counsel for the Defendant: I G Waller S.C. and P Noonan