City of Melville Aged Persons' Trust (Inc) v City of Melville

[2001] WASC 109

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   CITY OF MELVILLE AGED PERSONS' TRUST (INC) -v- CITY OF MELVILLE & ORS [2001] WASC 109

CORAM:   MURRAY J

HEARD:   6 APRIL 2001

DELIVERED          :   3 MAY 2001

FILE NO/S:   CIV 1424 of 2001

BETWEEN:   CITY OF MELVILLE AGED PERSONS' TRUST (INC)

Plaintiff

AND

CITY OF MELVILLE
First Defendant

RON HOFFMAN
ANTHONY CENIVIVA
PAM NEESHAM
DAVID DE BURGH
TRISH PHELAN
CLIVE ROBERTSON
Second Defendants

Catchwords:

Administrative law - Incorporated association - Requirements of law to make changes to rules - Validity of rules

Legislation:

Associations Incorporation Act 1987 (WA), s 17, s 24

Result:

Interlocutory injunction granted

Representation:

Counsel:

Plaintiff:     Dr J T Schoombee

First Defendant             :     Mr L A Stein & Mr M J Hardy

Second Defendants       :     Mr L A Stein & Mr M J Hardy

Solicitors:

Plaintiff:     Hammond King Touyz

First Defendant             :     Clayton Utz

Second Defendants       :     Clayton Utz

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Bennetts v Board of Fire Commissioners of New South Wales [1967] 187 WN (Pt 1) (NSW) 307

Cameron v Hogan (1934) 51 CLR 358

St George Bank Ltd v Rangers Club of NSW (Inc) (1995) 18 ACSR 370

1. MURRAY J:  On 28 March 2001, by writ issued out of this Court, the plaintiff, an association which was incorporated under the Associations Incorporation Act 1895 (WA) and which now operates as an incorporated association under the Associations Incorporation Act 1987 (WA), sued the defendants over a resolution adopted by the Council of the first defendant, the City of Melville, on 20 March 2001.

2. The indorsement of claim sets out the resolution which recites that the City, by its Council, views with great concern the actions of the plaintiff, by its Board, in purporting to adopt a constitution in 1999, invalidly in circumstances to which I shall refer in more detail shortly.  The City takes the view that the 1992 constitution of the plaintiff remains the plaintiff's governing document and under that constitution, the approval of the City for the appointment of members to the Board was required and had not been obtained.  Therefore, the Council of the City resolved by absolute majority to declare all positions on the plaintiff's Board vacant under cl 32 of the 1992 constitution with effect from 31 March 2001.  Those persons were to be invited to discuss with the City how the Board might be reconstituted, but in the meantime, a Board was appointed as an interim arrangement and the members of that Board, chaired by the Mayor, were all councillors of the City.  Apart from the Mayor, those persons are the second defendants.  In addition, the Board was to have on it a representative of the persons who receive the services of the trust.

3. The plaintiff's claim is for a declaration that its valid constitution is the 1999 constitution.  Therefore it claims a declaration that the resolution of the City of 20 March 2001 is legally ineffective and it seeks to restrain the defendants from taking any steps to implement that resolution, including any attempt to carry out the functions of the Board and to appoint an auditor to the plaintiff.

4. It is trite law that to succeed in its application for an interlocutory injunction the plaintiff must establish that there is a serious question to be tried in support of the grant of interlocutory relief and that the balance of convenience favours the grant of the injunction rather than its refusal.  The balance of convenience conveys the need for the court to come to the view that the risk of injustice if it is wrong favours the grant rather than the refusal of interlocutory relief.  As can be seen from my summary of the indorsement of claim, central to the dispute between the parties is the validity of the 1999 constitution adopted by the plaintiff and, as will be seen, that question particularly depends upon an interpretation of relevant provisions of the Associations Incorporation Act 1987 (WA).  Almost necessarily in those circumstances the concept of a serious question to be tried tends to merge into a final view upon the merits of the action.

5. In many respects this is a sad case because it involves a genuine difference in view on the part of well motivated individuals on both sides of the dispute.  It appears that efforts have been made to resolve the difficulties without recourse to the court but that has not proved to be possible.  Although the affidavits on each side discuss the operations of the trust and the care that those involved with it have taken over the years to ensure that its affairs are conducted properly, that material is not to the point in these proceedings; nor is it material to know, as other affidavit material seeks to inform the court, that the City has over the years been closely involved with the affairs of the trust, wishes to continue that involvement and considers that it may not accept purported changes in the constitution of the trust which would have the effect of loosening the ties between it and the City.  I note that the present uncertainty is said to be adversely affecting the peace of mind of a number of the many residents of the retirement villages operated by the trust.

6. The trust was first incorporated in 1974 and operated under a particular constitution until that was amended in 1992.  By that time the 1895 Associations Incorporation Act had been repealed and the 1987 Act enacted.  Upon the repeal of the 1895 Act, by s 47 of the 1987 Act, certain transitional provisions came into effect.  They are contained in the 1987 Act, s 48 and Schedule 2 of that Act, par 1 of which deems associations incorporated under the repealed Act to be associations incorporated under the present Act and continues the rules of such associations in effect, "subject to alteration under this Act".  By par 4, s 16, which specifies certain matters required to be provided for in the rules of an incorporated association, does not apply to any association that was immediately before the commencement of the Act incorporated under the repealed Act.  So the scheme of the Act is clear, but in this case certain amendments were made to the constitution in 1992 and the case involves no suggestion of invalidity in the adoption of the 1992 constitution.

7. Under that constitution it is made clear that the trust is a non‑profit incorporated association established with the primary object of generally assisting elderly people and particularly to provide and maintain suitable accommodation for their care.  There is a board of management established, chaired by the Mayor of the City, and upon which its Council is otherwise represented.  The decisions of the Board are made by a voting process with the chairman having a casting vote if necessary.  There is an executive officer of the Board and other employees are provided for.

8. The City may, by an absolute majority of its Council, declare vacant all offices and all positions on the Board and any of its subcommittees, after discussing with the Board the reason why such a step should be taken and what steps are to be taken to reconstitute the Board:  cl 32.  Under cl 33 the City may, by absolute majority of its Council, dissolve the trust and dispose of its assets in accordance with the law and consistently with its objects.

9. Finally, and of particular materiality to this case, cl 35 provides:

   "Proposed alterations to this Constitution must receive the assent of not less than two­‑thirds of the members of the Board from time to time and thereafter be ratified by an absolute majority of the members of the Council and no alteration shall be of effect until such approvals have been obtained, and submitted to the Office of State Corporate Affairs."

   That changed the procedure formerly provided for alteration of the rules of the association.

10. The City asserts that whether or not the Board of the Trust complied with the first portion of r 35, the second portion of the rule requiring ratification by an absolute majority of the City's Council was not complied with in making the 1999 constitution.  Hence, the invalidity for which it argues and which it asserts justified its action taken on 20 March 2001 to declare all positions on the Board vacant under cl 32 of the 1992 constitution and to proceed thereunder to reconstitute the Board on an interim basis.  As I have said, attempts were made between the parties to resolve the difficulty which the City perceives and the problem was considered and discussed throughout the year 2000 but, again as I have already mentioned, unsuccessfully.

11. The 1999 constitution of the Trust was finally adopted by its Board at its annual general meeting held at the City's civic centre on 13 September 1999.  The meeting was chaired by the Mayor and a new Board, again to be chaired by the Mayor, was appointed without, as I understand it, the need for elections as the number of nominations to the Board equalled the various positions which required to be filled.  The Board then turned to an item of what was described as special business.  That firstly concerned alterations which were proposed to what I understand to have been a much discussed draft constitution.  They were put to the Board and passed.

12. The minutes do not record, but an affidavit of the Mayor establishes to my satisfaction, that the 1999 constitution in its final form was then adopted.  The Mayor says that she was aware that under the Act a special resolution of the Board was required, but in the event no question arose about this as all 12 of the 13 members of the Board present at the meeting voted in favour of the resolution to adopt the 1999 constitution. 

13. In lieu of the procedure formerly provided in r 35, the 1999 constitution provides by r 7(a):

    "Alterations, amendments or additions or rescindments (sic) to the Constitution may be made by a three quarter (3/4) majority of Directors of the Board present at a special meeting of the Board of Directors of which notice in writing of intention to alter, add or amend the Constitution has been delivered to each Director of the Board, together with a draft of the proposed alteration, amendments or additions to the Constitution."

    It will be observed that although alterations to the Constitution by a special resolution would require a three‑quarter majority of the Board members present (a quorum under r 6(h) being half the members of the Board), as opposed to the requirement of r 35 for a two‑thirds majority of the members of the Board, the present rule if valid requires no ratification by an absolute majority of the members of the Council of the City.

14. Notice of the adoption of the rules by special resolution was given by the Trust to the relevant section of the Ministry of Fair Trading and was received on 4 November 1999 in the office of the Commissioner for Corporate Affairs (WA). That is required by the Act, s 17(2) to be done within a month of the passing of the special resolution, altering the rules. In this case therefore the notification appears to be technically out of time, but the Commissioner may allow an extension of time and whilst, by s 17(3) of the Act, an alteration of the rules of an incorporated association does not take effect until s 17(2) is complied with, that is not the point at issue in this case which, as argued, is not about any question of informality of procedure but about the legal effect of the procedure by which the rules of the Trust were changed into the form of the 1999 constitution.

15. The rules of an incorporated association will be ineffective unless they conform to the requirements of the Act. By s 16 (which of course does not apply to this association) that would not be the case unless the rules include provision in respect of each of the matters specified in Schedule 1 "and the rules are otherwise consistent with this Act". Necessarily therefore, this case is not about whether or not the rules do make such provision. The case essentially is concerned with the process of alteration of the rules and that is governed by s 17(1) which provides simply that, subject to s 18 and s 19, "An incorporated association may alter its rules by special resolution but not otherwise." I have mentioned that the balance of s 17 is concerned with the notification procedure.

16. Section 18 provides additional requirements in respect of an alteration of the rules to change the name of the incorporated association. Not only must s 17 be complied with but the approval of the Commissioner must be given to the change of name, and the section contains a number of provisions guiding the Commissioner as to giving or refusing his approval and providing for a review of his decision by the Minister. Similarly, s 19 provides the additional requirement in respect of the alteration of the objects of an incorporated association that no such change to the rules will take effect unless not only is s 17 complied with but the approval of the Commissioner is given to the alteration of the objects or purposes sought to be effected. Again, the Commissioner is given guidance as to that process and there is a capacity to obtain a review of his decision by the Minister. It can be seen therefore that in those provisions there are additional requirements of approval before alterations to the rules of an incorporated association will take effect and s 17(1) is expressed to be subject to s 18 and s 19.

17. For the purposes of s 17(1) a "special resolution" is defined by the Act, s 24(1) in the following terms:

    "For the purposes of the is Act, a resolution is a special resolution if it is passed by a majority of not less than three‑fourths of the members of the association who are entitled under the rules of the association to vote and vote in person … at a general meeting of which notice specifying the intention to propose the resolution as a special resolution was given in accordance with those rules."

    It is evident that, so far as the vote required for alterations to the constitution by members of the Board of the Trust is concerned, r 35 of the 1992 constitution did not in terms define a special resolution within the meaning of s 24(1), although no doubt it would ordinarily be the case that to comply with this aspect of r 35 would have that effect and as I have noted, that was undoubtedly the case on this occasion. On the other hand, r 7(a) of the 1999 constitution appears to be drawn with the provisions of s 24(1) in mind.

18. The trust argues that s 17, s 18 and s 19 are effectively a legislative code dealing comprehensively and exclusively with the manner by which an amendment may be made to the rules of an incorporated association and it is argued that no other procedural requirements may be imposed by the rules of the association themselves. The present position under the 1987 Act is contrasted with that under the Act of 1895, s 7 and s 7A of which, in providing the power to change the name of an association or to change its objects, expressly did so if that might also be done in accordance "with the sanction required by its constitution". For my part I think that is not particularly helpful because under s 7(2) of the former Act it was simply provided that any association might from time to time alter, vary or rescind any or all of its rules. Presumably that was a power which might be exercised whether or not provision for such alteration was made by the constitution of the association or, in other words, the rules of the association themselves. I was referred to the second reading speech upon the enactment of the 1987 Act: Hansard, 22 September 1987, p 4006. But what was said there offers no particular guidance in the interpretation of s 17(1).

19. On the other hand, for the City it is argued that s 17(1) is only concerned to set a minimum process for the passage of a special resolution and it has nothing to say about other requirements which, it is argued, may be imposed upon the process of achieving change to the rules by the rules themselves, such as the process of ratification provided for in r 35. It is argued that if the process of achieving change was exclusively provided in the Act itself, there would be no need for or capacity to act under any rule of an association in respect of the process of changing the rules. Any such rule would be otiose to the extent that it merely repeated the combination of s 17(1) and s 24, and certainly it has to be accepted that, having regard to the provisions of s 24, it must be possible to make valid rules of an association concerned with the process by which change to the rules is effected, because s 24 itself provides for the notice of the special resolution to be given in accordance with the rules and for the vote to be by proxies or postal voting where the rules of the association so allow. Further, Schedule 1, which, as has been seen, is concerned to set out what must be dealt with in the rules if under s 16 they are to be taken to conform to the requirements of the Act, provides specifically in cl 11 that the rules are to provide for, "The manner of altering and rescinding the rules and of making additional rules of the incorporated association."

20. I have come to the clear view that the arguments for the Trust are right.  It follows that there is a serious question to be tried in respect of the applicable process of achieving change to the rules which was governed in this case by r 35 of the 1992 constitution, in effect to alter the rules by repealing those in the 1992 version of the constitution and replacing them with those contained within the 1999 version.  But the processes of r 35 could only be given effect insofar as they were consistent or not in conflict with the relevant provisions of the Act.

21. Section 17(1) is not merely a provision as to voting. If that were its effect it would simply have provided, without being subject to s 18 and s 19, that the resolution or decision of an incorporated association to alter its rules must be by special resolution. The subject of s 17(1), however, is the alteration of the rules, the end point of the process initiated by the passing of a special resolution within the framework of s 24 and the provisions of the rules, which cl 11 of Schedule 1 envisages there will be and of which s 24 has something to say as to their content. In my opinion, the words "but not otherwise" in s 17(1) mean exactly what they say.

22. The only way to achieve an alteration to the rules of an incorporated association is the passage of a special resolution in terms of s 24, ie, at a meeting of those who under the rules are entitled to vote upon such a question (in this case the Board of the trust), voting in the manner provided by the rules and having been called together by a notice of the proposed resolution and that it is to be a special resolution, given in accordance with the rules. Section 24(1) provides the meaning of the term "special resolution" and would take precedence over any provision of the rules which would be ineffective to the extent that it might be applied to produce a resolution which was not a special resolution as defined by s 24(1).

23. In terms of s 17(1) the passage of such a resolution will alter the rules of the association and that is the only way it may be done, subject only to the requirement of notice to the Commissioner, accompanied by the appropriate certification under s 17(2), because by s 17(3) the alteration achieved by the passage of the resolution does not take effect until that notice procedure is complied with. Further, the only other procedural requirements, to which s 17(1) is expressly subject, are those contained in s 18 and s 19 in a case where there is to be a change of name or the alteration of the objects of the incorporated association.

24. It follows that in my view, upon the completion of those processes, which are established to have taken place in this case, the alteration to the rules which was the substitution of the 1999 constitution took effect.  The additional requirement of ratification by an absolute majority of the members of the Council of the City, because it imposed a further fetter on the capacity of the association to alter its rules, was ineffective.  To that extent r 35 was invalid.  At least, in my view, having regard to the present context of an application for an interlocutory injunction, there is clearly a serious question to be tried that such is the case.

1. As to the question of the balance of convenience, in my opinion it is abundantly clear that this favours the grant of immediately operative interlocutory relief.  The Board put in place by the decision of the association itself to manage its affairs should, subject to a final resolution of the question at issue between the parties, commence its operation as the duly appointed Board and I do not think that there is any merit in the proposition advanced in respect of the balance of convenience that the plaintiff, the Trust itself, should be taken to have no interest to enable it to move the court for interlocutory relief in respect of the constitution of its Board. 

2. I will grant the interlocutory injunction sought in par 2 of the plaintiff's chamber summons until the final determination of the action or until further order, with liberty to apply in the usual terms, noting that there is before the court an undertaking as to damages in appropriate terms duly executed under the seal of the plaintiff.