Currawinya Pty Limited v Adam; Adam v Currawinya Pty Limited [No. 2] - [2011] NSWSC 1

Supreme Court

New South Wales

Medium Neutral Citation: Currawinya Pty Limited v Adam; Adam v Currawinya Pty Limited [No. 2] [2011] NSWSC 1
Hearing dates: 9 September 2010
Decision date: 28 January 2011
Before: Slattery J
Decision:
In conclusion, I have found that the 13 March 1999 resolution passed in general meeting did not create a valid rule or regulation under Currawinya's memorandum of association clause 2(a)(iii). It was not effective in my view, to prevent the defendants from utilising the company's common property by the grazing of cows pursuant to a licence to do so which they enjoyed. I have found that the company's trespass claim fails. But I have also found that the 13 March 1999 resolution does not modify any rights to a class of shares of which the defendants are the sole members. Nor do the defendants' contract claim, misrepresentation claim, or estoppel claim succeed. I have found that the defendants were not entitled to the lease to which they claim to be entitled. But on the other hand the company has not offered a lease to the defendants, or indeed any other shareholders in conformity with the company's constitution. Nor did the company mislead the defendants about their right to graze cattle on Currawinya when they acquired their shares from Mr Bordet in 1986.
The parties should provide submissions: as to the future course, if any, of the defendants' claims under Corporations Act, ss 232 and 233; as to whether or not the proceedings should be mediated at this point and finally as to questions of costs.
I direct the parties to bring in short minutes of order to give effect to these reasons.

Catchwords:
CORPORATIONS - constitution and replaceable rules - types of companies - construction of constitution - company incorporated for multiple occupancy living in a rural environment - dispute about members' right to use common property for grazing cattle - constitution does not grant a right to graze cattle on common property to members - whether resolution of members passed in March 1999 is effective to withdraw permission to graze cattle on common property - whether resolution modifies class rights in contravention of procedure prescribed under the company's constitution - whether company's affairs conducted oppressively - application for winding up company adjourned so parties can modify their affairs on the basis of the Court's judgment - HELD - resolution not effective to withdraw permission to graze cattle resolution is not a rule or regulation under memorandum of association clause 2(a)(iii) - no interference with class rights

TORTS - trespass - trespass to land - defence of licence to enter property - whether defendants liable in trespass to the company for grazing their cattle on common property - HELD - defendants not liable in trespass as existing permission to graze cattle on common property not validly withdrawn by members resolution of March 1999

CONTRACTS - general contractual principles - whether company has breached contract with member by failing to issue lease to member in conformity with company's constitution - HELD - no breach found
MISLEADING AND DECEPTIVE CONDUCT - whether company misled members about the right to graze cattle on common property - HELD - no misleading or deceptive conduct found.
Legislation Cited: Animals Act 1977
Civil Procedure Act 2005
Corporations Law
Corporations Act 2001
Crown Lands Consolidation Act 1913
Trade Practices Act 1974
Cases Cited: Amalgamated Investment & Property Co Ltd (in liquidation) v Texas Commerce Bank Ltd [1982] QB 84
Barker v R (1983) 153 CLR 338
Canas Property Co Ltd v KL Television Services Ltd (1970) 2 QB 433
City Pacific Limited v Bacon (No 2) (2009) 178 FCR 82
Clifton Securities Limited v Huntley [1948] 2 All ER 3
Cook v R & M Reurick Holdings Ltd [2004] NSWCA 268
Cumbrian Newspapers Group Ltd v Cumberland & Westmoreland Herald Newspaper & Printing Co Ltd [1987] Ch 1
Cummings v Macks (2000) 96 FCR 345
Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666
Fink v Fink (1946) 24 CLR 127
Fischer v Easthaven Limited (1964) 80 WN (NSW) 1155
Grundt v Great Boulder Pty Ltd (1937) 59 CLR 641
Lidsale Nominees Pty Ltd v Elkharadly [1979] VR 84
Magill v Santina Pty Limited [1983] 1 NSWLR 517
Nevin v B and R Enclosures [2004] NSWCA 339
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Re Broadway Motors Holdings Pty Limited (in liquidation) (1986) 6 NSWLR 45
Ryan v Edna May Junction Gold Mining Co NL (1916) 21 CLR 487
Sommerhalder & Sommerhalder v Burjan & Feigl [1962] SASR 271
Thompson v Ward (1953) 2 QB 153
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Viviano v Natoli & Ors (1998) 43 NSWLR 695
Wilson v Meudon Pty Ltd (2006) ANZ ConvR 93
Yakamia Dairy Pty Ltd v Wood [1976] WAR 57
Category: Principal judgment
Parties: Currawinya Pty Limited (Plaintiff/Cross Defendant)
Jill Adam (First Defendant/First Cross Claimant)
Representation: Counsel:
Mr G Elliott (Plaintiff/Cross Defendant)
Mr J Priestley (Defendant/Cross Defendant)
Solicitors:
Steve Bolt, Bolt Findlay Solicitors & Mediators (Plaintiff/Cross Defendant)
James Fuggle, Rummery Solicitors (Defendant/Cross Defendant)

File Number(s): 09/4848 06/6350

JUDGMENT

HIS HONOUR : This is my second judgment in these proceedings. In the first judgment given on 2 August 2010 ( Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666) , I identified nine questions arising on the Amended Statement of Claim, which the parties had asked the Court to determine. I determined four of those questions in the first judgment. In doing so I reached conclusions about the construction of the memorandum and articles of association of Currawinya Pty Ltd ("Currawinya") that did not correspond with the position taken by either party in their submissions. My first judgment indicated a concern that neither party would have entirely anticipated the conclusions reached up to that point in the first judgment. There was a consequent risk of subsequent issues being decided on a basis, to which neither party had had a chance to respond. In order to ensure complete procedural fairness, in relation to the remaining five issues, I gave a further opportunity to the parties to adjust their submissions in light of the findings made in relation to questions one to four.

Both Currawinya and the defendants took the opportunity to file supplementary submissions on the remaining issues. Those submissions were principally directed to question five of the remaining questions, which relate to the validity of Currawinya's resolution of 13 March 1999. The parties' supplementary submissions were received between 30 August 2010 and 3 September 2010.

This judgment first deals with the five questions remaining for determination. It then deals with another six issues raised by the claims for relief on the defendants' cross claim. The five remaining questions are numbered here as they were in the original judgment. They are:

(5) Do the defendants have a defence to the company's action for trespass because the defendants have a right (under a lease or through the company's constitution) to graze cattle, which licence has not been validly withdrawn by the company?

(6) Is the company unable to maintain an action for trespass to the common land because the company is no longer in possession of the common land?

(7) Do the defendants have an answer to the company's claim for trespass by reason of the company's issue of invoices to the defendants after the company withdrew permission to shareholders to run cattle on the common land?

(8) In the event that trespass is established, is the company precluded from claiming any more than nominal damages from the defendants by reason of clause 2 (a) of the constitution?

(9) In the event that trespass is established what is the applicable market rate for agistment, which may be claimed by the company, and upon what number of cattle should agistment be calculated?

This judgment uses the same terminology as the first judgment. For convenience it here reproduces the background information about the course of the disputes involving Currawinya and about the proceedings that were set out in paragraphs [3] to [17] of the first judgment: Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666, [3] to [17]:

"3. Although the dispute between Ms Adam, Mr Bickmore and the company extends as far back as the conception of Currawinya as a corporate entity in 1986, a reasonably uncontroversial account of the events leading to this litigation is possible.

4. A proposal for the purchase of Currawinya's land to accommodate multiple occupancy rural living emerged in the mid 1970s. Mr Murray Slavin, a local solicitor, first purchased the land in 1976 with such a scheme in mind. His original idea was to hold the land on trust for others. His concept was that the persons who contributed moneys to the acquisition of the land would be entitled to a home site on it. The early arrangements were relatively unstructured but in 1986 Mr Slavin transferred the land to Currawinya. That same year the company adopted its current constitution in the form of a memorandum and articles of association. In 1986 the share in Currawinya now held by Ms Adam and Mr Bickmore was issued to a Mr Bordet. Ms Adam and Mr Bickmore acquired the share from him soon afterwards and have held it ever since.

5. Each share in Currawinya entitles the shareholder to a designated area of approximately 20 acres (8 hectares) for that shareholder's exclusive use as a living area. It was contemplated that each shareholder would construct a homestead on this designated area. The 25 shares in Currawinya are all issued to shareholders who exercise entitlements exclusively to occupy and use these designated areas on the property. Their exclusive use of such designated areas accounts for the occupation of approximately 500 acres of Currawinya's total land area. Currawinya's constitution also allows its shareholders, according to its terms, to "occupy the balance of the land not set aside and designated for sole occupation by a member". Shareholders use this common property for their general recreational purposes. But Ms Adam also grazes cattle on the common property. Other shareholders attempted but failed to stop this use of common property. Their efforts to deter Ms Adam from grazing her cattle on common property have occasioned other disputes between the parties that have also surfaced in this litigation.

6. When Currawinya was incorporated in 1986 a number of shareholders did graze cattle on common property. Ms Adam and Mr Bickmore argue that it can be inferred in part from this history that all shareholders have been entitled to graze cattle on common property from an early time. The company's pleadings concede that persons other than Ms Adam and Mr Bickmore did graze cattle on the common property between 1986 and approximately 1999. Ms Adam and Mr Bickmore also say that grazing occurred prior to this date.

7. In 1999 conflicts between Currawinya's shareholders about cattle grazing on common property came to a head. The issue had been brewing for some time. Until November 1997 shareholders who grazed cattle on common property did so without paying agistment fees to the company. On 29 November 1997 the company first resolved in a general meeting to set agistment fees for the grazing of cattle on common property. But the mood was generally changing against the grazing of cattle on Currawinya's common property. A further general meeting on 4 October 1998 considered but adjourned a motion "that the right to graze cattle on Currawinya be rescinded". The adjourned motion was debated again at a general meeting on 13 March 1999, when it was resolved in slightly different terms that "permission" to graze cattle on the land was "rescinded". The assumption behind this resolution, which is now challenged by Ms Adam and Mr Bickmore, was that "permission" was required to graze cattle on common property. Their principal contention in these proceedings is that: Currawinya's constitution (and specifically clause 2(a)(i) of its memorandum of association) directly confers a right on them to graze cattle on common property; that no permission was ever required from the company for this use of common property; and, that therefore the company could not withdraw permission for this use.

8. After the March 1999 resolution all shareholders other than Ms Adam removed their cattle from the common area of Currawinya. Ms Adam and Mr Bickmore maintained at that time and until the trial in late 2009 that until March 1999 they, together with other shareholders, were exercising their rights as shareholders to use common property. Ms Adam and Mr Bickmore contended that their entitlement to graze cattle on the common land continued and was not validly terminated by the resolution of the general meeting on 13 March 1999.

9. These proceedings comprise two actions being heard together although no separate issues are raised in the second action. Currawinya first commenced proceedings against Ms Adam and Mr Bickmore (proceedings 6350 of 2006) for relief including: a declaration that Ms Adam and Mr Bickmore are not entitled as shareholders or otherwise to graze cattle and other livestock on common property without the company's permission; for orders restraining them from grazing cattle on common property; and claiming damages.

10. Ms Adam and Mr Bickmore have cross-claimed seeking relief, on the basis that they are successful in their primary contention that their rights to graze cattle on the common land were not validly rescinded in March 1999. Upon the cross claim they contend that the majority of Currawinya's shareholders invalidly attempted to terminate rights attaching to their share in the company. The cross claim seeks: a declaration that the company's purported cancellation of their right to graze cattle on Currawinya's common property is void; that the company is estopped from denying their entitlement to graze cattle on common property; a declaration that the company is not entitled to charge a fee for grazing cattle on common property; for orders restraining the company from acting contrary to these declarations and alternatively for the winding up of Currawinya under Corporations Act (Cth) 2001, ss 232 and 233 on the basis that its affairs have been conducted in a manner which is oppressive to, unfairly prejudicial to, or unfairly discriminatory against Ms Adam and Mr Bickmore.

11. Although they are defendants and cross- claimants in proceedings 6350 of 2006, Ms Adam and Mr Bickmore commenced supplementary proceedings (numbered 4840 of 2009) for the winding up of Currawinya, seeking the same relief as was sought on the cross claim. The Court was told that these supplementary proceedings were commenced in order to provide a vehicle for the advertising of the proposed winding up of Currawinya. Due to their subsidiary nature these supplementary proceedings did not feature in the parties arguments. For convenience therefore throughout the rest of these reasons Ms Adam and Mr Bickmore will be described together as "the defendants". Currawinya Pty Limited is described either as "Currawinya" or "the company" in these reasons.

12. The first group of issues to be determined arises from Currawinya's claim and relates to the validity of the resolution in the general meeting on 13 March 1999 and the consequences of its validity or invalidity. These issues include: the nature of Ms Adam and Mr Bickmore's entitlements to graze cattle; whether those entitlements were validly terminated on 13 March 1999; whether in grazing cattle on common property subsequent to 13 March 1999 Ms Adam is trespassing and is liable to pay mesne profits and damages; and whether or not the company's claim against Ms Adam and Mr Bickmore is maintainable in these proceedings by reason of the Agricultural Tenancies Act 1990 (NSW).

13. But the case also involves a second group of issues raised in the defendants' cross claim and related to the company's actions towards the defendants after the passage of the 13 March 1999 resolution. These actions are the source of the defendants' contention of action in a manner oppressive of and unfairly prejudicial to them said to attract relief under Corporations Act 2001, ss 232 and 233. The alleged oppressive conduct of which the defendants complain is not merely the passage of the 13 March 1999 resolution. But the allegedly oppressive conduct lies within a relatively narrow time period.

14. The first quarter of 2005 was as important as the first quarter of 1999 in the dispute between the company and the defendants about grazing cattle on Currawinya's land. In the first quarter of that year Currawinya issued an invoice for agistment and other fees in a substantial sum to the defendants and then at a general meeting purported to forfeit their shares for non-payment of moneys said to be due on the invoice.

15. The invoice of 17 January 2005 was in the following terms:

'

INVOICE J17

17th January 2005

To:

G. Bickmore

14 Queen Elizabeth St

Coriki NSW 2471

9th January 2005 - Loss of potential income @ $25,000.00 per year x 5 years - $125,000.00

9th January 2005 - Legal Costs to date relating to cattle grazing over 5 years - $8,500.00

9th January 2005 - Loss of pasture due to J. Adam & R. Konicanin grazing their private cattle heard (sic) on Currawinya Pty Ltd common land without approval over 5 years - $39,500.00

9th January 2005 - Expenses incurred in the removal of Caveats placed by J. Adam & R. Konicanin over the titles of Currawinya Pty Ltd - $500.00

9th January 2005 - Administration Expenses in relation to the cattle issue over 5 years - $2,500.00

TOTAL: $176,000.00

PAYMENT IS NOW DUE '

16. This invoice was not paid. The company in general meeting acted on the non-payment in early March 2005. A motion moved "from the floor" of the general meeting of the company on 9 March, 2005, to the following effect: -

'The meeting adjourned at 1.35pm to 1.40pm.

The members then put a motion from the floor as follows.

(MOTION GBI) From the Floor

That the members instruct the Secretary to sell share 15 on which the Company has a lien in the following manner;

That the area currently used as share 15 home site be returned to common land & new home site chosen by the successful purchaser.

That a $5,000.00 deposit be paid & the Transfer be dealt with & sent for stamping & the Companies details be updated with the new shareholder.

That the Balance of $30,000.00 be paid on the 1 st of July 05, that failure to pay the balance of $30,000.00 on the 1 st of July 05 will see the share forfeited & the deposit lost.

The members accept Tony & Narelle Stalone, Fran & Andy Ware, Mac Greer, Iain Worrall, Janet Dunn or Wayne Gleeson as the new shareholder & acceptance is dependant on the 1 st of these people paying the required $5,000.00 deposit.'

17. The motion was passed. Seventeen votes were recorded in favour and one vote against, with one abstention. Ms Adam voted against the motion. The company then purported to act on the forfeiture of the defendants share, although their occupation of their designated area and their grazing of cattle on the common property continued. The defendants alleged that this forfeiture was an act of oppression. They also relied upon other alleged oppressive conduct, identified later in these reasons."

Currawinya's Constitution

The provisions of the memorandum of association of Currawinya's constitution that are either in contest or referred to in argument in these proceedings are also set out in my first judgment: Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666, at [21] and [22]. The relevant provisions are memorandum clauses 2(a), (b), (c), (d), (k), (l), (m), (s), (t), (u), (v) and 4. For convenience they are also reproduced here, together with the introduction to them recorded in paragraphs [21] and [22] of my first judgment:

21. The defendants submit that the right they claim to graze cows on common property arises directly from clause 2 (a)(i) of the memorandum of association of Currawinya's constitution. Clause 2 of the memorandum of association identifies the objects for which the company is established. Somewhat unusually for companies of this type Currawinya's memorandum of association does not anywhere identify the precise area of land to be occupied by reason of the holding of a particular share in Currawinya. For understandable reasons with such a large property as Currawinya and when in 1986 not all members had selected part of the land for their homesteads, the scheme of the memorandum was constructed flexibly. It allowed each shareholder later to identify, by a process of designation, the particular homestead land that the shareholder wished to occupy. The part of clause 2(a) in contest in the parties' arguments about the construction of clause 2(a)(i) includes this scheme of designation and is set out below:-

'2. The objects for which the Company is established are:

(a) To purchase and develop all those pieces or parcels of land situated in the County of Buller being the land comprised in Certificates of Title Volume 9865 Folio 22, Volume 2627 Folio 35, Volume 4969 Folio 177, Volume 15271 Folio 107, Volume 15280 Folio 41, Volume 14950 Folio 179 and Conditional Purchase 1973/53 Casino (hereinafter called "the land") on a multiple occupancy basis for the sole use and benefit of the members of the Company without attempting to make any profits or other gains for the Company, it being understood that all expenses for development of the land (excluding erection of buildings), maintenance of the improvements upon the land (excluding private access roads, private dwellings and other improvements effected on any part of the land subject to Proprietary Leases), rates and taxes on the land together with reasonable reserve for such purposes shall be paid by the members of the Company in proportion to their shareholdings.

(i) In order to carry out the object and purpose of the Company specified in this memorandum, areas of the land up to 8 hectares designated by the Company shall be leased to members of the Company together with the right for each such member in common with the other members to occupy the balance of the land not set aside and designated for sole occupation by a member under leases in such form and for such term as shall be prescribed by the Company, which leases shall entitle the members of the Company to the use and occupancy of the respective areas of the land during the term thereof. All such leases are hereinafter called "Proprietary Leases".

(ii) Subject to and in accordance with the provisions of this memorandum, a member owning the requisite share shall be entitled, and solely by reason of his ownership of the said share in the Company, to use and occupy for dwelling, agricultural, grazing or such other purposes as may be approved by the special consent of members the area of land designated by the Company to the share held by such member in such form and for such term or terms as shall be prescribed by the Company and by or in accordance with this memorandum, but each such lease shall entitle the member and the Lessee therein referred to to the use and occupancy of the designated area during the term or terms thereof and for so long as the Lessee observes the conditions thereof and makes the payments therein or by or under this memorandum prescribed.

(iii) The designated areas of the land area are to be assigned and leases thereto executed in accordance with the reservations made by the members at the time they make application for a share in the Company. All rights of use and occupation shall be subject to the further provisions of this memorandum and to such rules and regulations as the Company may from time to time prescribe for the conduct of the land and the affairs of the Company, provided however that all rules and regulations shall affect all leases uniformly.

(iv) All Proprietary Leases shall be subordinate to such mortgage or mortgages as may be registered in the appropriate public registry at the time of issue of such lease, or to such other mortgage or mortgages as may from time to time be duly authorised and executed by the Company and so registered provided that nothing herein contained shall authorise the Company to grant any mortgage or mortgages over the Land without the consent of eighty per cent of the members attending a duly convened general meeting in person or by proxy of the members.

(v) Any Lessee or member of the Company wishing to sub-let his designated area of the land shall submit in writing an Application so to do to the Company together with the name and address of the prospective sub-lessee, accompanied by suitable references, and the said Application shall be ruled upon by the Company within fourteen (14) days. In case the said Application is declined, there shall be no appeal from the decision of the Company, unless there shall have been a previous Application declined. If a previous Application has been declined by the Company the Lessee shall have the right to appeal to the members as hereinafter provided. Notwithstanding anything herein contained, the Company or the members as the case may be shall decline any application for sub-letting in the case where if such sub-letting were permitted the number of non-unit holding adults residing on the Land would exceed one third of all adults residing thereon.

(vi)(1) The Company shall, on 1 st July in each year or so near thereto as may be practicable, cause to be prepared a budget covering the itemised estimated income of the Company from all sources and the estimated cost of constructing, maintaining and operating the land during the ensuing twelve month period, including all expenses for taxes, interest on mortgage indebtedness and all other maintenance and operating expenses for such ensuing accounting period including construction and maintenance of roadworks, dams, provision of light, water and all other common services and amenities provided by the Company, costs of repairs and replacements plus any deficit for or in respect of the previous year plus reasonable reserves for such purposes and with the aid of such budget and such other data as it may deem proper the Company shall levy an assessment against each Lessee for his proportionate share of such estimated net cost of maintaining and operating the land for the ensuing twelve month period. Each Lessee shall be assessed with that proportion of such total estimated net cost which the share that he owns in the Company bears to the total number of its issued shares. Such total estimated net cost for any year and the assessments payable by Lessees on account thereof may be adjusted by the Company from time to time as hereinafter provided.

(2) The Company in such budget or assessment may raise and create any reasonable contingency or other reserve or surplus fund and expenses for any purpose of the Company.

(3) The Company may from time to time up to the close of the said twelve month period for which a budget has been estimated and an assessment made, increase or diminish the amount previously budgeted and assessed for such year, and for that purpose may waive, discharge, increase or diminish any annual instalment of an assessment due or thereafter to become due in such period.

(4) Except for the purpose of correcting any arithmetical or other error relating solely to the particular Proprietary Lease every such adjustment shall be made against or in favour of all members and Proprietary Lessees in the same proportion as is hereinbefore provided.

(5) The Company may include in the said budget an assessment for any such period of any liabilities or items of expenses which accrued or became payable in a previous accounting period or which might have been included in the budget and assessment for a previous accounting period but were not included therein.

(6) The Company may budget for and assess any particular item or items by a separate assessment or assessments which shall be payable in the same manner and time as the assessment and instalment hereinbefore referred to.

(7) All annual assessments shall be due and payable to the Company annually in advance unless specifically otherwise provided by the Company.

(8) The powers and authority to determine and establish the amount of and to require payment of the above assessments (whether by way of rent under any Proprietary Lease or otherwise) shall be possessed only by the Company.

(9) The total amount payable in any one accounting period by any member and Lessee shall not without the consent of eighty per cent of the members attending a duly convened general meeting in person or by proxy exceed the sum of $300-00.

(vii) All annual assessments shall be due and payable in advance on the first day of the month of August, in each year without further notice, and shall be paid to the Company at such place or places as the Company shall from time to time nominate.'

22. The parties have also referred to other parts of clause 2 and to clause 4 of the memorandum of association to support their competing constructions of clause 2(a)(i). It is convenient to set these other provisions out here. They are the following:-

(b) To create a community with an economically viable lifestyle.

(c) To establish a community structure with work programs for communal participation and provision for individual freedom and privacy within that structure.

(d) To encourage experimentation and development of alternative methods of energy, technology, agriculture and gardening, based on harmony and balance with the environment, as a working community aspiring towards self sufficiency.

...

(k) To borrow or raise money in such manner as the Company may think fit and to arrange the same or the repayment or performance of any debt, liability, contract, guarantee or other engagement incurred or to be incurred or entered into by the Company in any way PROVIDED HOWEVER that the Company shall have no power to mortgage, charge or grant any security over any of the assets or undertaking of the Company on any account whatsoever except with the consent of 80% of the members attending a duly convened general meeting by person or by proxy.

(l) To make, draw, accept, endorse, discount, execute and issue promissory notes, bills of exchange, bills of lading and other negotiable or transferable instruments PROVIDED HOWEVER that the Company shall have no power to mortgage, charge or grant any security over any of the assets or undertaking of the Company on any account whatsoever except with the consent of 80% of the members attending a duly convened general meeting by person or by proxy.

(m) In furtherance of the objects of the Company to sell, work, improve, manage, develop, exchange, lease, license, dispose of, turn to account or otherwise deal with all or any part of the property and rights of the Company PROVIDED HOWEVER that the Company shall have no power to see transfer or otherwise dispose of the land except with the unanimous consent of all members.

....

(s) To carry on any other business whatsoever which eighty per cent of the members attending a duly convened general meeting in person or by proxy think is capable of being conveniently or profitably carried on by the Company or which in their opinion is calculated either directly or indirectly to enhance the value of or render profitable any of the Company's property and rights.

(t) To acquire and undertake the whole or any part of the business, property and liabilities of any person or company carrying on any business whatsoever which eighty per cent of the members attending a duly convened general meeting in person or by proxy may think fit.

(u) To apply for purchase or otherwise acquire any patents, patent rights, inventions, copyrights, designs, trade marks, formulae, designs, secret processes, technical information, franchises and other rights, privileges and concessions and to use, exercise, develop or otherwise turn to account the property rights or information so acquired.

(v) To invest and deal with the money of the Company in such manner as eighty per cent of the members attending a duly convened general meeting in person or by proxy may think fit.

...

4. memorandum 2(a), (k) (1) and (m) and this Clause of the memorandum of Association of the Company shall not be altered, modified or deleted except with the unanimous consent of all members.'

The defendants' principal contention is that the company gave them a right to graze cattle on common property under the terms of clause 2(a)(i) of the memorandum of association itself. I rejected that argument in my answers to questions (1) and (2) in the first judgment.

I have found that a right to graze cattle on common property is not found in memorandum clause 2(a)(i): Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666 at [76]. But I also found that although clauses 2(a)(i) and (iii) do not contemplate that shareholders will be able to dwell upon or conduct agricultural or grazing activity on Currawinya's common property, nevertheless there is no prohibition in Currawinya's constitution against these activities being conducted on common property: Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666 at [71] and [72]. I found that if such activities are to be conducted on common property then rules or regulation would need to be passed to permit and regulate them: Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666 at [71].

In the first judgment I also examined the basis of the defendants' present rights to use Currawinya's common property. I explained that in conformity with Glass JA's analysis in Magill v Santina Pty Limited [1983] 1 NSWLR 517 at 525D; (1983) 8 ACLR 289 that in the absence of the issue of a lease to them that the defendants: have a contractual entitlement to the occupation of their designated home site area as exclusive licensees of the company; and a supplementary non exclusive licence to occupy common property; but that these licences are revocable for breach of a rule or regulation conforming with clause 2(a)(iii). This was explained in paragraphs [49] to [54] of my first judgment:

"[49] What then in the absence of a lease is the member's clause 2(a)(ii) right to the member's designated area? It is as Glass JA explained in Magill v Santina Pty Ltd (1983) 1 NSWLR 517 at 525D a contractual entitlement to the occupation of the shareholder's own designated area as an exclusive licensee from the company. The scope of a member's permissible activity upon the designated area whilst the member uses and occupies under such a contractual licence would be no wider than the scope of activity which could be granted under the lease in waiting, namely for "dwelling, agricultural, grazing or such other purposes as may be approved by the special consent of members".

[50] We now turn to Currawinya's common property. A key to understanding the operation of clause 2(a)(i) with respect to common property is to see that the words " together with the right of each such member in common with the other members to occupy the balance of the land" [emphasis added] introduce and describe the grant of a right of occupation of common property that is contemplated to be included with the company's lease to the member of the member's designated area. The right of each member (enjoyed in common with other members) "to occupy the balance of the land" arises when a designated area is actually leased to the member and not before. Clause 2(a)(i) does not use the language of immediate grant of a right for each member with others to occupy the common area.

[51] The lease of the member's designated area offered by the company in conformity with clause 2(a)(i) should also contain each member's right in common with other members to occupy the common area. Clause 2(a)(i) only refers to a right to occupy common property " in common with other members" which could be no more than a non-exclusive licence. To comply with clause 2(a)(i) the lease offered by the company should offer such a licence. If it does not, the member is entitled to insist on having the lease conform to the terms of the agreement recorded in clause 2(a)(i) of Currawinya's constitution and for a licence of common property to be added. But the licence to be so added must follow the language of clause 2(a)(i) and be a right only "in common with other members to occupy the balance of the land". In whatever form the company leases the designated area to a member, the supplementary rights that come with that lease are measured by the terms of clause 2(a)(i). In one sense clause 2(a)(i) really only goes a little further than the common law in that member's right to occupy at least part of the common property would be an implied accommodation to the interest in land conveyed with the lease of the designated area to allow access to that designated area: Dowse v Wynyard Holdings Ltd [1962] NSWR 252.

[52] But the defendants have an exclusive licence of their designated area, not a lease. What right to common property accompanies their exclusive licence? They have from the company a licence to occupy common property, which is supplementary to their exclusive licence to use and occupy their designated area. It can be no more extensive than a licence that clause 2(a)(i) contemplates might accompany a lease to a member of a designated area. Being a licence it is revocable but its revocation is governed by the constitution. This leads to a consideration of memorandum clause 2(a)(iii).

[53] Clause 2(a)(iii) commences with the issue of the assignment of designated areas but proceeds to a provision which covers "all rights of use and occupation" which are said to be subject to "such rules and regulations as the Company may from time to time prescribe for the conduct of the land and the affairs of the company , provided however that all rules and regulations shall affect all leases uniformly" [emphasis added]. Clause 2(a)(iii) is drawn in wide enough terms to empower the company to make rules and regulations that govern both a member's use of the member's designated area and a member's occupation of common property. Provided it observes the requirement to "affect all leases uniformly" the company may prescribe rules and regulations about a licence of common property embedded in a lease of designated property. Those rules and regulations may, for example, provide that a lease of designated property may be terminated or an embedded licence of common property may be revoked for breaches of certain rules or regulations. Equally those rules and regulations may apply to supplementary licences of common property before a lease is executed. Importantly for the defendant's arguments in my view such licences are in the nature of permissions, which are revocable for breach of rules and regulations commonly applicable to all members, which make clear that revocation will be a consequence of breach of the rule or regulation.

[54] The exclusive contractual licence of a designated area that the company grants to a member before a lease to the member is executed is ancillary to the later grant of a lease to the member. In my view the company could not revoke the exclusive licence of an individual member (or the member's supplementary licence of common property) merely so as to prejudice the member's capacity later to take up a lease. But the company may revoke such licences for breach of an appropriately expressed rule or regulation conforming with clause 2(a)(iii)."

In the first judgment I also rejected the argument that the 13 March 1999 resolution was a resolution to which memorandum of association clause 4 applied: Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666, paragraphs [73] to [78] . I found in answer to question (2) that it was not necessary for the 13 March 1999 resolution to be passed unanimously as would be required by clause 4. My reason for reaching that conclusion was that a resolution to prohibit the grazing of cattle on common property is not a resolution to alter or modify memorandum clause 2(a), because memorandum clause 2(a) does not contain a right to graze cattle. My reasoning to this conclusion was set out in paragraphs [73] to [78] of my first judgment:

"73 This question throws up issues as to the construction of Clause 4 of the constitution. Clause 4 is set out earlier in these reasons. The clause is an entrenching provision in the constitution. It restricts the freedom of members to alter the constitution in a way that may alter the fundamental operations of the company or that might entrench upon minority rights.

74 The issue in the construction of Clause 4 is whether or not the 1999 resolution to withdraw permission to graze cattle on common land involved any alteration to clause 2 (a) of the constitution. The resolution at the general meeting of the members of Currawinya on 13 March 1999 was "that the shareholders permission to graze cattle on Currawinya Pty Limited common land be rescinded at this general meeting". The company says that this resolution does not alter clause 2 of the constitution and that accordingly unanimous consent is not required by clause 4 for the decision. The company's argument was that any right to graze cattle on common property arises not from the constitution but by virtue of a lease that is yet to be executed between the company and the defendants at some future time or under rules and regulations authorised by clause 2(a)(iii).

75 Against this the defendants say that the 13 March 1999 resolution prohibiting the defendants from grazing cattle on common property "is an alteration or modification of clause 2(a) because it alters or modifies the right to occupy the common land bestowed by that clause and which had been enjoyed by the defendants up to the time of the purported rescission of 13 March 1999" (defendants' closing submissions paragraph 37).

76 The defendant's contention about this question fails due to my finding on question (1) that memorandum clause 2(a)(i) does not confer an irrevocable right upon members to graze cattle on common property. Clause 4 is an entrenching provision but it does not entrench a right to graze cattle on common property. Such a right is not found in the terms of memorandum clause 2(a)(i). Prior to the execution of a lease over their designated property the defendants only have an exclusive licence from the company to their designated area and a supplementary licence to use common property in common with other members subject to rules and regulations made by the company under memorandum clause 2(a)(iii). That licence might include, as it did for a long period, a liberty to graze cattle. The resolution on 13 March 1999 purported to vary the defendants' licence to graze cattle on Currawinya's common property. It did not either in form or in substance purport to amend memorandum clause 2(a). Even after the passage of the 13 March 1999 resolution the defendants still have an exclusive licence to their designated area and a supplementary licence to occupy common property. Furthermore they still have the rights to apply for lease of the designated area in conformity with memorandum clause 2(a)(i) and subject to their doing equity by paying all levies due by them to the company.

77 The defendants also criticise company resolutions to impose agistment fees as also being contrary to clause 4. Not only is there no entitlement in memorandum clause 2(a)(i) for the defendants to graze cattle on common property, there is no entitlement to do so free of the payment of agistment fees.

78 It was not necessary for the resolution in general meeting of 13 March 1999 to be passed unanimously. It was not a resolution to which clause 4 applied. As I explain below there were other problems with this resolution."

The parties' submissions invite analysis of Currawinya's corporate records over an unusually lengthy time period. Currawinya was first purchased in 1976. Its current constitution was adopted in 1986. The parties have adduced evidence and offered submissions about corporate documents, correspondence, general meetings and directors' meetings throughout the thirty-five years since 1976. The issues joined between the parties present questions issues about the meaning and effect of these documents and what exactly occurred at many of these meetings.

It is neither necessary nor desirable for the Court to resolve all of these disputes. Only a few of therm are critical to determining the matters in issue. Balancing economy and justice the approach that I have taken in these reasons is to determine only those factual disputes that are essential for deciding whether or not to grant the relief sought in the Amended Statement of Claim or on the Cross Claim. Sieving out essential from inessential material over a thirty-five year period has taken some time. The fact that only a fraction of the factual material that the parties have put before the Court is reproduced in this judgment is not a criticism of the diligence of counsel and solicitors on both sides. The Court has been much assisted by their thorough preparation of evidence and submissions. But these reasons are long enough already.

I now deal with the five remaining questions and then the issues that arise on the Cross Claim.

5 A Defence to the Company's Trespass Claim?

Introduction

In the Amended Statement of Claim the company seeks: a declaration that the defendants are not entitled as shareholders to graze cattle or other livestock on common property "without the permission of the plaintiff"; an injunction restraining the defendants from grazing cattle or other livestock on common property; and, mesne profits for the defendants' alleged trespass on common property. The Court's answers to questions (1) and (2) have decided that Currawinya's constitution does not itself give the defendants an express entitlement to graze cattle on Currawinya's common property. But the answers to questions (1) and (2) also show that there is no express prohibition in Currawinya's constitution against the grazing of cattle or other livestock on common property. Such activity on common property could be authorised and governed by "rules and regulations" made in accordance with clause 2(a)(iii) of Currawinya's memorandum of association. The question of whether the defendants have a present entitlement to graze cattle on Currawinya's common property is not to be decided solely from Currawinya's constitution.

Rather the defendants say, relying upon findings in my first judgment Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666 at [7] and [66], that the company long permitted cattle grazing on common property until a resolution passed in general meeting on 13 March 1999 purported to revoke that long standing permission. The defendants submit: that the 13 March 1999 resolution was legally ineffective; that the company's permission to graze cattle on common property stands; and that as a result the company's continuing permission to graze cattle is their defence to the company 's claim for trespass.

In response the company says: that the 13 March 1999 resolution was effective to revoke permission to the defendants to graze cattle on common property; that even if it were ineffective for that purpose that a number of other alternative events were sufficient to revoke all permission to shareholders to graze cattle on common areas; and that the defendants' cattle are trespassing on common property. These are the issues for determination under question (5).

Both sides argued the case on the basis that the company had an action for trespass at common law against a shareholder grazing cattle on common property without permission. The parties did not undertake an analysis of all the ingredients of this cause of action in the circumstances before the Court. The case throws up some curious problems. The old common law action for cattle trespass was abolished by the Animals Act 1977, s 4(1). But many of the acts of Ms Adam and her employees in relation to the cattle may arguably be trespass despite the abolition. So the issue before the court survives the abolition of the tort.

Whatever its rights in trespass, the plaintiff company also seeks an injunction restraining the defendants from grazing cattle on common property, contrary to the defendants' revoked licence. It is not necessary for the Court to decide exactly which ingredients of an action for trespass are made out and which are not because the defendants' defence that they hold an existing licence succeeds. The Court decides in this section that the 13 March 1999 resolution was ineffective to prohibit the defendants from exercising their contractual licence to use Currawinya's common property by grazing cattle in those common property and that therefore their licence to do so continued. No action for trespass succeeds against the defendants for grazing cattle. Nor will the defendants be enjoined from grazing cattle on Currawinya's common property. The company is capable of passing "rules and regulations" under clause 2(a)(iii) of the memorandum of association prohibiting the grazing of cattle on common property, provided the precise requirements of clause 2(a)(iii) are met. But it had not done so before these proceedings were heard. It is necessary first to consider the parties' arguments about the 13 March 1999 resolution.

The 13 March 1999 Resolution

Motions 12 and 13 of the general meeting of Currawinya's members held on 13 March 1999 appear in the minutes of the company as having resolved:

"Motion 12) that the shareholders' permission to graze cattle on Currawinya Pty Limited common land be rescinded at this general meeting.

Villis/Worrall Carried: For 8 Against 4

Motion 13) that the cattle owners be required to move cattle [from] common land by 2 August 1999

Villis/Worrall Carried: For 8 Against 4 "

Both motions were proposed by Mr Terrence Villis and seconded by Mr Bruce Worrall and were carried by 8 votes to 4. Motion 13 gave almost five months notice to the shareholders affected of the requirement for removal. These resolutions are described collectively throughout this judgment as "the 13 March 1999 resolution".

Ms Adam immediately contested this decision. She declined to remove the cattle that she was running on Currawinya on 13 March 1999. At the next general meeting of the company, on 29 May 1999, together with Mr Bickmore, Ms Liehne and Mr S Gould, she proposed a number of motions: to temporarily rescind Motion 13 of the 13 March 1999 general meeting; to agist cattle on Currawinya so as to reduce the company's then external indebtedness; to reinstate the company's own herd of cattle so as to generate income for the company; and finally a Motion "that leases be issued to shareholders forthwith; such leases to state the rights of shareholders to use the land not taken up by other shareholders, and their responsibilities in caring for such spaces, in the best interests of the company. Note that 'lease' means 'a right of occupancy'". All of these Motions were either lost or they lapsed. As the analysis below shows, Ms Adam's response to the 13 March 1999 resolution when she called for the issue of a lease defining her rights to use common property, correctly identified a defect in the company's chosen approach to regulating shareholder use of common property.

The defendants argue that the form of the 13 March 1999 resolution did not create a rule or regulation for the conduct of the company's land. It was, the defendant says, ineffective to modify the defendants' existing supplementary contractual licence (that is, the contractual licence supplementary to the defendants' exclusive licence to their designated home site area) and ineffective to prevent them from grazing cattle, because only a rule or regulation conforming with clause 2(a)(iii) can do that.

The defendants' argument is valid. The 13 March 1999 resolution is not a rule or regulation made under clause 2(a)(iii). The defendant's analysis is correct that only a rule or regulation made under clause 2 (a)(iii) is capable of prescribing/modifying a shareholders' entitlement for the conduct of Currawinya's common property, and indeed its designated areas. This is so for several reasons.

First, the company argues that a resolution of Currawainya's members in general meeting is sufficient itself to grant or revoke a licence to shareholders to use the common property in particular ways.

This is not how clause 2(a)(iii) works. Rather it creates a formal and comprehensive, rule making system for all persons having an interest in Currawinya's land.

It is comprehensive. It applies as clause 2(a)(iii) says to "all rights of use and occupation". The rules and regulations so prescribed are for the conduct of "the land", which expression is defined to include all Currawinya's freehold titles, whether designated home site areas or common property.

It creates a formal rule making system. The system is to be distinguished from mere majority votes at general meetings. This distinction exists because the system of "rules and regulations" has the object of prescribing standards "for the conduct of the land" and "the affairs of the company". The articles of association already made detailed provision for proceedings at general meetings of shareholders in articles 10 to 25 including the taking of votes at such meetings. These articles deal with the meeting and voting procedures for the wide range of possible subjects that Currawinya's members may consider in general meeting. But the "rules and regulations" under memorandum clause 2(a)(iii) deal with a special subset of those subjects.

The rules and regulations must be "prescribed", because like legislation they set general standards of conduct and do not, for example, merely govern a particular member, a particular event, or a particular property. The company must clearly state that it is prescribing a "rule and regulation" under clause 2(a)(iii) to distinguish what it is doing from passing ordinary resolutions in general meeting.

This is not just pointless legal formality. Clause 2(a)(iii) requires such formality because once prescribed the "rules and regulations" alter the substance of the property interests held by shareholders, not just as members, but as the company's lessees. The rules and regulations relate to the leases to members. When prescribed "all rules and regulations shall affect all leases uniformly". Clause 2(a)(iii)'s first sentence is the source of the company's obligation to grant a lease to a member of a member's designated area. The balance of the clause deals with limits on those leasehold rights. Clause 2(a)(iii) calls for the company in general meeting to make a statement of which resolutions of general meetings are "prescribed" and which do not. The company's proprietary Leaseholders should be given a set of the "prescribed" rules and regulations as they exist from time to time. Otherwise members would not be in a position to know exactly how each rule or regulation will "affect" their leasehold interest. It also must be clear from "rules and regulations" how they "affect" leases. For example, does contravention of a rule result in a particular sanction, lease revocation, licence revocation or something else? These things must be made clear. The "affect" on leases should be evident from the form of lease too. The property interests of all members should enjoy this same protection.

This is a matter of considerable practical importance. Members issued with proprietary leases under clause 2(a)(i) may wish to borrow funds to develop their designated home site areas. A leasehold interest which may be registered on title or protected by caveat provides a form of security for such borrowings. Leaseholders and lenders need to be able to readily identify all the "prescribed" rules and regulations that "affect" a lease. It is to be expected that these prescribed rules and regulations would be maintained as a composite set of rules and regulations accessible by leaseholders and lenders in one place or more appropriately served on them, and able to be amended by the company from time to time. These characteristics are inherent in my view, in the idea of "rules and regulations" as a form of in house legislation for the company.

Unfortunately Currawinya does not maintain such a composite prescribed set of rules and regulations. Some attempts were made during the 1990's to collect the more significant resolutions passed in general meeting but nothing was tendered in evidence resembling a set of prescribed rules and regulations. This exposes practical difficulties in Currawinya's position. The company argues that Motion 12 at Currawinya's 13 March 2011 general meeting is effective as a clause 2(a)(iii) rule or regulation, or is a sufficient basis for the defendants' cattle to be held to be trespassing on common property. But Motion 12 is expressed in the form of a revocation of an existing permission, "that the shareholders' permission to graze cattle on Currawinya Pty Limited common land be rescinded at this general meeting". The Motion does not identify the original permission it is purporting to revoke. It is impossible to know from the form of Motion 12 alone whether or not the revocation is precisely co-extensive with the original grant of a licence to graze. One of the debates in these proceedings has been how and when the company first permitted shareholders to graze cattle on Currawinya's common property and on what terms. Evidence about this subject exists but it is unsatisfactory and strongly contested. If the company had kept one composite set of prescribed rules and regulations, Motion 12 of 13 March 1999 would have been readily expressed as a whole or partial repeal of an existing rule allowing the grazing of cattle on common property. Instead the defendants rightly question in final submissions what is the "permission" being rescinded.

Moreover, shareholders/leaseholders cannot reasonably be expected to comb through the twenty five years of resolutions of general meetings to ascertain which resolutions might be classed as prescribing a rule or regulation and then to ascertain whether those resolutions have been wholly or partially revoked. There is additional difficulty in executing such a task. Some of the company's resolutions are conditional and it is impossible on the face of the resolution to work out whether the condition has been fulfilled, for example the resolution "that poison not be used on Currawinya communal land without prior approval of a general meeting" (General Meeting 24 July 1999). Some of the company's resolutions authorise particular conduct by individual members or by the company's agents on common property. But in doing so they implicitly prevent all other shareholders from using common property in a manner that is inconsistent with the conduct being authorised by the resolution. For example the resolution, "that T. Villis be permitted to plant the riparian zone of the Cataract and Clarence Rivers with indigenous tree and plant species" (General Meeting on 27 February 2000) presumably would prevent any shareholder from interfering with the plantings or damaging them once they were in place. If this resolution were a rule or regulation its impact on other shareholders is uncertain. Clause 2(a)(iii) is designed to bring some rational order into the management of Currawinya's designated areas and its common property. Order is needed. In 1999, there were five general meetings of the company held respectively on 13 March 1999, 29 May 1999, 24 July 1999, 3 October 1999 and 20 November 1999. Between 15 and 25 resolutions were considered at each of these meetings. Several general meetings were held in most subsequent years. Compliance with clause 2(a)(iii), operating as described in these reasons, enables shareholders readily to comprehend how their property rights were being affected.

But there are some limitations on what rules and regulations may be prescribed by the company under memorandum clause 2(a)(iii). Clause 2(a)(iii) prescribes "rules and regulations" as being one of two sources of power constraining or enlarging members' rights of use and occupation of Currawinya's land. The other identified source of power in clause 2(a)(iii) is the memorandum of association itself, which expressly permits designated areas to be "used and occupied" by members "for dwelling, agricultural, grazing or such other purposes as may be approved by the special consent of members". Clause 2(a)(iii) would not authorise the prescription of rules and regulations that entrenched upon an individual member's freedom to dwell upon, or conduct agricultural or grazing activities up on the members' own designated area. The memorandum limits the rules and regulations that may be prescribed for common property. There would be other implied limitations. The company could not, for example, make a rule or regulation that so limited the use of common property so as to impede an individual member's vehicular access to his or her designated area.

How does clause 2(a)(iii) apply in the absence of the company issuing a lease to the defendants? I leave aside for a moment the dispute about whether the defendants have refused to accept a lease of the designated area offered to them or whether the company has not offered them a lease at all. The defendants do not yet have a lease. Clause 2(a)(iii) contemplates that all rules and regulations "shall affect all leases uniformly". It assumes that such a lease will have been executed. But the provision is expressed broadly enough to govern the defendant's existing contractual rights to a lease of their designated area and their supplementary licence of common property, as "all rights of use and occupation" are subject to "such rules and regulations". Thus, if the company were now to pass an appropriately expressed rule or regulation it could modify the defendants' capacity to graze cattle on common property.

The 13 March 1999 resolution is not a clause 2(a)(iii) rule or regulation. It is a resolution of Currawinya's members in general meeting. Subject to the defendants' arguments about procedural defects in the 13 March 1999 meeting, what is the effect on the defendant's rights of a mere resolution rescinding "permission" to shareholders to graze cattle on Currawinya's common property? In my opinion, the resolution did not have the effect of revoking the defendants to graze cattle on common property. Currawinya's constitution provides a clear method for restricting the defendants' rights to use common property. The method prescribed by the constitution serves an important purpose in preserving the rights of members and the orderly use of the company's common property. The company did not use that method. What the company did was ineffective to restrict the scope of the defendants' supplementary contractual licence to use common property. It is not disputed that before 13 March 1999 the defendants' supplementary licence to use common property included the grazing of cattle. That licence was unchanged from 13 March 1999.

The company argues that the defendants were in no doubt as to the intent of the resolution and its desired effect to revoke all existing licence to graze cattle. That can be accepted. The company and its members made a compact as to exactly what procedure would be followed before members' rights of use and occupation would be limited. But merely to enforce "the intent" of the resolution would involve abandoning the important agreed procedure.

Alternative Events Justifying a Rule

The company says in the alternative, that if the 13 March 1999 resolution is not itself a valid clause 2 (a)(iii) rule or regulation that there are other events that are sufficient to remove the defendants' right to graze cattle on common property. There are said to be in support of this argument: first, a resolution of members in general meeting on 4 October 1998; secondly, the adoption in practice by Currawinya's directors of the effect of the 13 March 1999 resolution as a rule; and thirdly, the resolution passed at a company general meeting on 21 October 2002. In my view, none of these three events qualifies as a clause 2(a)(iii) rule or regulation.

The 4 October 1998 Resolution . Currawinya's members passed a resolution in general meeting on 4 October 1998 in the following terms:-

"That the right to graze cattle on Currawinya common land be rescinded unless an acceptable stock management plan (which is in harmony with Rivercare and State Government guidelines) is presented at the General Meeting in February"

Heightened attention was given to the problems associated with grazing cattle on common property in the six months leading up to 4 October 1998. As the defendants point out, at the general meeting on 18 April 1998 motions were passed "that cattle be excluded from grazing Currawinya's river flats and associated gullies" (Motion 10) and "that if Motion 19 of general meeting 18 April 1998 is not complied with within 6 months of this meeting then the right to graze cattle on Currawinya Pty Limited common land be rescinded" (Motion 11). A number of Motions at a general meeting held on 23 May 1998 proposed an October [1998] conference to consider a management plan for common property and to discuss the issue of grazing cattle on and the use of common property. A conference involving a mediator was held between 28 September and 2 October 1998. This conference did not resolve much. But it provided a forum for Ms Adam and her opponents amongst the body of shareholders to firmly exchange opinions both for and against the wisdom of grazing cattle on common property. The 4 October 1998 meeting at which the subject motion was passed followed the conference. The 4 October 1998 Motion is no more effective as a clause 2(a)(iii) rule or regulation than is the 13 March 1999 resolution. It does not purport to prescribe a rule. The extra deliberation leading up to it makes little difference to the legal analysis of its effect. Indeed, it is really more in the nature of a statement of corporate intention to take a future step, if an acceptable stock management plan were not to be presented in February 1999. The 4 October 1998 resolution is in such a conditional form that it could not readily qualify as a clause 2(a)(iii) rule or regulation.

Directors Adopt the Rule in Practice. The company next argues that after the publication of the 13 March 1999 resolution Curawinya's directors in practice adopted it as a "rule", which has since gained the increasing support of members. The argument is that all directors and shareholders have adopted and lived by this rule since 1999. The argument is flawed.

The argument arises from the somewhat peculiar and informal way that Currawinya has run its affairs over many years. I accept Mr Worrall's account that from the time that the land was purchased that a great many decisions of the company which would in many corporate organisations be made by the board of directors, were made by the company in general meeting. Once the company made a decision in general meeting the directors and/or the secretary customarily implemented the decision. Mr Worrall explains this procedure carried over from the period prior to 1984 when ownership of the land was held by Mr Murray Slavin as trustee for the occupiers. The trustee followed the occupiers' wishes, much as would trustees holding property for the members of a voluntary association. This kind of decision-making is not uncommon in small corporate structures that exist solely for the benefit of their members. Mr Worrall is well placed to give an account of Currawinya's corporate history, as he and Mr Villis have lived on Currawinya's land from the time that it was held in trusteeship. The minutes of general meetings and directors' meetings from the early 1980's confirm the correctness of what Mr Worrall says about Currawinya's early decision-making practices.

Mr Worrall says that because of this history that the views of members expressed in general meeting have a special significance both generally and with respect to the 13 March 1999 resolution. He says of the general background to this decision: that the company is entitled to make decisions about the use of its land; that previously (that is prior to 13 March 1999) a majority of shareholders had favoured grazing cattle on Currawinya's common property but that some shareholders then changed their minds about the issue; that if a single shareholder were to be permitted to run cattle on the property without a proper cattle management plan that dissension and conflict would be encouraged within the company and shareholders would start to ignore company decisions; that furthermore, allowing the running of cattle on common property without a proper cattle management plan would provoke accusations and counter accusations about damage to property and common areas. The risks Mr Worrall identifies can be accepted at a practical level.

But Mr Worrall explains that this decision was fully implemented, a matter which is then built on in the company's final submissions. He says, and I accept his account about this subject, that when Ms Adam's cattle were not removed from common property during the six months after the 13 March 1999 resolution that the cattle issue was discussed at a director's meeting on 14 September 1999. Then the annual general meeting on 3 October 1999 resolved that the company's secretary write to the defendants "requesting that they comply with Motion 13 of the meeting of the 13 March 1999 to remove their private cattle herd from Currawinya within the next 14 days".

I accept that the company sent a letter to the defendants in conformity with the 3 October 1999 resolution. I also accept that the minutes of the director's meeting of 14 September 1999 and the annual general meeting of 3 October 1999 were published to members including the defendants, as were the minutes of the 13 March 1999 meeting. The company submits on the basis of these facts that "a rule was made within clause 2 (a)(iii) of the memorandum by these several publication of minutes and by the company executive acting on the 13 March 1999 resolution (which itself was the culmination of an extensive consideration of the cattle issue)".

This argument is not successful. None of these resolutions or this correspondence describes what is being done as a "rule", or an amendment to a "rule", or invokes memorandum clause 2(a)(iii) or says that the company is publishing a "rule" of common application to all leases. The company does not merely by further publication of the 13 March 1999 resolution to members elevate it into a clause 2(a)(iii) rule. The later resolutions of the directors meeting of 14 September 1999 and the annual general meeting of 4 October 1999 are merely couched in terms that seek to enforce the 13 March 1999 resolution against the defendants individually, rather than to create a rule.

Resolution on 21 October 2002 . The company also relies on what is described as a "Special Resolution" proposed by Ms Castrikum and Mr Villis at a general meeting of 21 October 2002 and passed unanimously. The resolution was to the effect "that no commercial animal ventures be carried out on common land by individual shareholders or their partners". The apparent intention of this resolution was somehow to amend the company's memorandum and articles of association. This is to be inferred from the fact that the publication of the minutes of that meeting is followed by the explanatory note "shareholders please note that this Special Resolution which needs an 80% vote was unanimously carried and will be included in the company's memorandum and articles of association". Curiously, neither the resolution nor the note explain exactly what part of the company's constitution is to be amended, nor how any such amendment will mesh with the operation of memorandum clause 2(a)(iii). Also the copy of the company's memorandum and articles of association tendered in evidence in these proceedings does not anywhere include this amendment. The company rightly concedes that this resolution cannot be an effective "special resolution" because it appears to amend the entrenched clause 2(a) contrary to memorandum clause 4. The company says that despite these deficiencies the 21 October 2002 resolution was intended to operate as a permanent rule and was valid and effective in accordance with clause 2(a)(iii), especially because it operates equally on all shareholders/lessees.

The flaw in this argument is that the 21 October 2002 resolution does not purport to be a clause 2(a)(iii) rule or regulation nor does it operate in substance as such a rule. Rather it operates inconsistently with the clause 2(a)(iii) rule making power by purporting to amend the company's constitution. In so doing it stands outside the more flexible system of rule making and amendment provided for by clause 2(a)(iii). This system allows members the opportunity to argue for change to the clause 2 (a)(iii) rules, rather than to have the use of common property tied up by constitutional amendment. There is no doubt that by running her cattle on common property Ms Adam has been conducting a "commercial animal venture" and would contravene this resolution were it effective as a rule or regulation. But because the clause 2(a)(iii) power has not been used the resolution does not regulate Ms Adam's use of Currawinya's common property.

The Defendants' Alternative Procedural Arguments

The Defendants also attack the 13 March 1999 resolution on a number of other, principally procedural, grounds. My conclusions about the 13 March 1999 resolution make it strictly unnecessary to deal with these arguments. Nevertheless, acknowledging the detailed contest that took place about these alternative challenges to the 13 March 1999 resolution, it is useful that I express my conclusions about them. Moreover, these challenges raise contested issues of fact. It may be useful for my findings about them to be recorded. These proceedings may go on appeal. By analogy with a trial judge's assessment of damages where a defendant is successful at trial, dealing with these arguments will assist the efficiency of any appeal process: Nevin v B and R Enclosures [2004] NSWCA 339 and Cook v R & M Reurick Holdings Ltd [2004] NSWCA 268.

The defendants put three arguments: first, that there was a procedural deficiency in calling the 13 March 1999 general meeting with the result that Motion 12 at that meeting was not valid; second, that the 13 March 1999 resolution involved an invalid cancellation of class rights held by the defendants; and, thirdly, that Motion 12 of the 13 March 1999 meeting was not passed as a special resolution when a special resolution was required. The second of these arguments is not considered here but under question 11 below.

Procedural Invalidity of the 13 March 1999 Meeting . The defendants argue that there was a procedural deficiency in the passing of the 13 March 1999 resolution in that the meeting of that date was said to not have been "validly called or conducted". The company says that there is no such procedural deficiency.

The alleged deficiency arises out of the circumstance that the meeting of 13 March 1999 was originally called for 2 March 1999 but was adjourned to the later date because of the lack of a quorum on the earlier date. The 2 March 1999 date was a Tuesday. The 13 March 1999 was a Saturday. It is not in issue that there was no quorum on 2 March 1999 and that there was a quorum on 13 March 1999. The defendants argued that the application of Article 11 of Currawinya's articles of association in the circumstances leads to the conclusion that the 13 March 1999 meeting was not validly constituted. Article 11 provides:-

"11. If within an hour from the time appointed for the meeting a quorum is not present the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the next day in the same week at the same time and place, or to such other day and at such other time and place as the members present may determine, and if at the adjourned meeting a quorum is not present within an hour from the time appointed for the meeting, the members present shall be a quorum."

Part of the 2 February 1999 notice of meeting (the first page) and the agenda for Currawinya's general meeting to be held on 2 March 1999 at Currawinya's Garden Cottage is in evidence. This notice of meeting set out the Motions to be voted on at the meeting including a Motion proposed by T. Villis "that cattle owners be required to remove cattle from common land by 2 August 1999" (Proposed Motion 6). The minutes of the meeting on 2 March 1999 record that "the directors put [Motion 1] that the general meeting of 2 March 1999 be adjourned because of a lack of quorum to Saturday 13 March 1999 at 10am at the Garden Cottage". Article 10 of Currawinya's articles of association provides that "five members present in person or by proxy and 60 per cent shall be a quorum".

The defendant argues that if the 2 March 1999 meeting was convened by the requisition of members, then Article 11 requires that upon the absence of a quorum that the meeting "shall be dissolved" and cannot be adjourned. It is clear, the argument goes, from the form of minutes the director's meeting on 2 March 1999 that the directors "adjourned" the 2 March 1999 general meeting. If it was a meeting requisitioned by members it could not be adjourned. But rather fresh notices would have needed to be issued and a fresh meeting called for 13 March 1999. That did not occur. So the defendants argue that the later meeting was invalidly inconstituted, because it did not comply with the notice requirements for a fresh meeting provided for in Article 7 of Currawinya's articles for at least 28 days notice of such a meeting to be given.

This argument is unsuccessful. I infer that the 2 March 1999 meeting was not convened upon the requisition of members. Although only one page of the notice of meeting and agenda is in evidence there are clear indicators that the 2 March 1999 general meeting was called by directors, not by members. It was adjourned by directors at a "directors meeting" held at 10.40am on 2 March 1999. There is no correspondence from members requisitioning the meeting. The minutes of the previous general meeting of 4 October 1998 record at their close "NEXT MEETING February '99 (Directors to set)." This is consistent with the directors then calling the general meeting early in 1999. There is nothing on the first page of the 2 February 1999 notice which gives any indication that the meeting thereby being notified was requisitioned by members. Examination of the history of the affairs of Currawinya leading up to1999 shows that Currawinya's board was generally quite responsive to the concerns of members such that it was unlikely that members would have had to requisition a meeting. The 13 Motions set out in the 2 February 1999 notice (page 1) are proposed by eight different shareholders. This is more than a third of members. The applicable legislation at the time, Corporations Law, s 249D would have required signatures for the requisition from all these shareholders on the requisition for the meeting. None of such signatories are in evidence. I find that the 2 February 1999 meeting was not convened on the requisition of members.

The defendants' other point is that if the 2 March 1999 meeting was convened other than on a requisition of members, then the adjournment of the meeting was by resolution of the directors not of the members present. The defendants argue Article 11 requires the members present to adjourn the meeting. The answer to this argument lies in the minutes of the meeting of 2 March 1999. The prefatory words "the directors put" before the Motion for adjournment supports the inferences: that the directors present at this meeting put this Motion to all the shareholders present; that those shareholders all agreed to it; and, that therefore the members "[d]etermined" within Article 11 the time and place of the adjourned meeting. All that the minutes indicate is that the directors initiated the motion for adjournment and the fixing of the time and place, as might be expected. Although the composite minutes of the 2 and 13 March 1999 are headed for 2 March 1999 "Director's Meeting", the better view of the record is that the meeting was adjourned by the members in general meeting. It was said to have been "carried unanimously". The result of the Motion was "meeting adjourned at 1pm". The members' not a directors' meeting was being adjourned. Accordingly, I conclude that the 2 March 1999 meeting was adjourned on the determination of the members present.

In any event, were either of the defendants' arguments about procedural irregularities in the calling of the 13 March 1999 meeting to have been upheld then, upon an application of Corporations Act , s 1322, resolution 12 would not be invalidated because of this procedural irregularity. I am of the opinion that any such irregularity neither caused nor is likely cause of "substantial injustice". I would not have been prepared to declare Motion 12 to be invalid. Corporations Act , s 1322 applies. The Corporations Law applicable in March 1999 included an identical provision: Corporations Law, s 1322. A "procedural irregularity" in this section includes a reference to the absence of a quorum in a meeting and a defect, irregularity or deficiency of notice of time: Corporations Act , s 1322(1). Corporations Act , s 1322(2) provides:-

Until 1975 Currawinya was owned by a Mr Tom Hamilton. He used it to graze cattle. In 1975 Mr Murray Slavin was a moving force promoting a proposal by Currawinya to set up a rural community on it. Mr Slavin laid out funds to procure an option to purchase the property and sought to raise funds to complete the purchase. He sent out his vision for Currawinya in a document entitled "Design Farm" dated 25 August 1975. It and subsequent documents of that period are of some importance for the misrepresentation claim. Ms Adam says she relied upon these documents to buy shares in the company. She says she looked at them when she attended the property whilst on holidays in the Christmas vacation of 1985 and 1986 and relied upon them a few months later in purchasing her shares.

Mr Slavin raised sufficient money for the purchase. He exercised the option to acquire Currawinya for $92,000 on 2 September 1976. At the same time he executed a deed of trust acknowledging that upon his purchase of the land, he held it as trustee on behalf of the company.

The structure of Mr Slavin as trustee on behalf of Currawinya was used because there were practical restrictions on dealing with non-freehold title owned by corporate entity in the State of New South Wales at that time: Crown Lands Consolidation Act 1913, s 44(5). The intention was that the company would receive title to the land once it had been converted to freehold. The land then purchased is identical to the land now held by Currawinya.

An interesting feature of Mr Slavin's "Design Farm" document of August 1975 is that it did contemplate the possibility of cattle being grazed on Currawinya but expressed views about the limited future of that activity:

"We are personally against the idea of having cattle on the property on a long term basis. However, while the land is becoming established, and while there are fairly heavy repayment commitments, we feel that we must investigate all possible methods of obtaining income. Heifers can be bought on present markets for about $25/head and sold after a year for at least $50/head (the short term market has converted to soya bean).

The land is free from most diseases that affect stock, and we believe we can maintain this by establishing quarantine paddocks and not overstocking.

There is such a large range of micro climates and vegetation on the site, we feel that there is enormous scope for growing fruit, nuts, vegetables, herbs, flowers and grains that range from those found around most of the extent of the east coast of Australia."

When speaking as "we" in the August 1975 "Design Farm" document Mr Slavin appears to be speaking on behalf of himself and a number of other promoters of the idea of purchasing Currawinya.

As an interim measure, until Currawinya's titles were converted to freehold, the company was left somewhat dormant and in the control of nominees. During this period the occupants of Currawinya conducted themselves through a kind of informal voluntary association. The company's interim custodians were Mr John Axtens, a solicitor, and Mr Regan, another solicitor, both from the Lismore legal firm Page, Regan & Axtens, who had acted on the purchase. They held one share each in the company's capital.

The early voluntary association that informally ran Currawinya never seems to have had a constitution or any agreed governing rules. Later on 5 February 1982 Messrs Page Regan & Axtens stated in correspondence that that firm had " no record of the establishment of rules for the voluntary association", as they made suggestions for the adoption of suggested rules. At a meeting later that year, in September 1982, extensive discussion took place about provisions that might be included in a set of rules for a voluntary association. A general consensus seems to have been reached about this subject but there is no evidence that this consensus was ever converted into a more formal set of rules. Rather it stayed as a draft set of minutes of meeting dated 4 September 1982.

From September 1978 Currawinya's company directors were Mr Slavin and Mr Hugh Ellicot. Mr Ellicot was also the company secretary. Mr Ellicot was an original member of the Currawinya community.

Currawinya first began to resemble its modern shareholding structure in 1984. On 12 May 1984 the voluntary association met and resolved to transfer the shares in Currawinya from Mr Regan and Mr Axtens to Mr Slavin and Mr Phil Clark. At the same meeting it was resolved that further shares be issued to persons who were considered at the time to be members of the voluntary association and to be entitled to ownership of shares of Curawinya. Later the same year the company's solicitors WP Walters & Company recorded the shares that had been issued to each shareholder. The partner handling the company's affairs, Mr A.B. Pagotto reported that the changes to Currawinya's land title had progressed to the point that Mr Slavin could now transfer the land to the company.

One aspect of that land transfer is of continuing significance in these proceedings. The defendants have argued in this case that they have a direct interest in the land independent of their shareholding in the company. They ultimately abandoned such a case. Aspects of that case are considered below. But the idea of individual shareholders retained an interest in Currawinya's land is incompatible with the way that this transfer of the land to the company was approached in 1984. Mr Pagotto reported to the company that nominal stamp duty of $6 only would be levied on the instrument of transfer of the land from Mr Slavin to the company on the basis that the company could provide to the Commissioner of Stamp Duties "sufficient proof of payment of the purchase money for the land by the company rather than Mr Slavin". Mr Pagotto acknowledged that the purchase moneys were provided by the members of the community rather than the company but he went on to say "although we are confident the commissioner would accept our argument that the persons providing the purchase moneys were in fact doing so as shareholders and members of the company". The argument seems to have been a reasonable one. The company existed at the time of the purchase of the land. The proper inference in the circumstances is that those person that provided money to Mr Slavin did so in the expectation of having shares in the company issued to them.

Once shares in Currawinya had been issued the process of re-drafting the memorandum and articles of association of the company began. Mr Pagotto gave instructions to undertake this process by November 1984. It was completed almost two years later when the company adopted its present Articles on 10 May 1986. The new Articles appeared to provoke lively debate among shareholders. Amendment was necessary because the 1976 Articles were a poor vehicle for the kind of community that the shareholders wished to develop. Those 1976 Articles did not include any limitation on the power of the company to sell the land or any reference to the rights of shareholders to occupy individual sites. On the other hand, the consensus which had been reached at the meeting of 4 September 1982 was more directed towards ordering a voluntary association than creating a suitable constitution for Currawinya. In the course of the debate about a new constitution Mr Pagotto reiterated to one shareholder, Mr Gene Mapp, his view that "there is no doubt from the Deed of Trust that it was the intention of the company and of the parties at the time that Mr Slavin would hold the land as Trustee for the company and not as Trustee for the individual shareholders". He explained that a principal task of the re-drafting process was to ensure that the new constitution allowed agreements to be reached between all members as to the exclusive occupation of particular portions of Currawinya's land by particular members in order to prevent the recurrence of problems about land occupation which had already occurred by 1984. The detail of the debate among members is not of present importance. But there can be little doubt that Mr Pagotto emphasised to all shareholders at the time the very message he recorded in correspondence on many occasions, that the company was a legal and beneficial owner of Currawinya's land. Mr Pagotto died before these proceedings came on for hearing.

The inference that the company is itself the beneficial owner of Currawinya's land is assisted by an examination of the minutes of the general meeting of the company at the time the land was transferred from Mr Slavin to the company. There is no evidence that anything other than a nominal $6 duty was actually paid. No larger sum seems to have been budgeted for or debated. The minutes do not contain consistent shareholders' assertions of a beneficial interest in Currawinya's land. It must be said though that one or two individual shareholders such as Mr Mapp did maintain eccentric positions that they were beneficially entitled to a particular part of the company's property. From time to time after 1986 some correspondence from the company also mistakenly refers to shareholders as having beneficial entitlements to the company's land. These statements are an expression of an erroneous view of the position or are merely a description of shareholder's rights to the lease of their designated area.

On 10 May 1986 Currawinya's members adopted its present constitution in general meeting. I accept the correctness of the company's analysis of what happened at this time. As a result of the adoption of these new articles by the company the members of the informal association exchanged whatever their rights were as association members for rights as shareholders according to Currawinya's articles. This is consistent with the way the shareholders have conducted the affairs of the company ever since. References to the voluntary association in the minutes of meeting of the company and in correspondence die away from May 1986. The company's minutes from this time are not consistent with the idea that any part of the company's business was being managed externally by some voluntary association.

The defendants occasionally adopted in evidence and submissions a position taken by Mr Douglas Heyman, a shareholder who challenged the company's right to seek compensation from him for damage caused to cattle yards, on the basis that the company was not the legal and beneficial owner of Currawinya's property. The defendants did not ultimately press this case upon the Court. They advanced their claims in these proceedings on the basis of their entitlements as shareholders of the company under the present articles, rather than as beneficial owners of the land outside the company structure.

The Defendants' Purchase of their Shares

The timing of the adoption of the new articles of association and the abandonment of the old voluntary association are of importance in relation to the defendants' acquisition of their share from Mr Bordet. Part of Ms Adam's misrepresentation case is that she says that she thought she was entitled to run cattle on Currawinya because of misrepresentations made to her by the company in documents created between 1975 and 1982. But by the time of her purchase in 1986 documents describing the intentions of occupiers of Currawinya between 1975 and 1982 had been wholly superseded by the adoption of Currawinya's new constitution and the fading away of the voluntary association.

Ms Adam and her brother Mr Bickmore agreed to purchase Mr Bordet's share in Currawinya for $15,000. They paid a deposit of $500 in July 1986 and the balance of the purchase price over time. They paid $5,200 between then and February and 1989. The final payment was made on 4 May 1989 when Ms Adam flew from Melbourne to Lismore to make it to Mr Bordet. I accept Ms Adam' evidence that this is when she paid the money.

There were protracted delays before the company issued a share certificate (certificate no. 15) to the defendants, seven years later on 10 June 1996. The reason for this delay is a matter of dispute in the proceedings. But it is not a dispute which the Court needs to resolve. Ms Adam says that she understood that the company had been advised by her solicitor of the final payment and that he was attending to the transfer with the company. Whatever documentation was prepared in 1989 seems to have been lost at the time. A fresh share transfer from Mr Bordet to the defendants for an express consideration of $15,000 was signed on 19 April 1993. Stamp duty on this transfer seems to have been paid at the same time as the company issued a share certificate to the defendants on 10 June 1996.

Ms Adam moved from Melbourne to the northern rivers district in 1994. She says and I accept, that she did so with the intention of building a cabin on the home site that she and her brother had selected at Currawinya. Because of existing conflict among shareholders and legal action in which the company was then involved, unrelated to these proceedings, she decided to buy a house in Lismore but was nevertheless elected as a director of the company. This short history enables analysis of the defendants' misrepresentation case.

Analysis of the Misrepresentation Case

The current constitution of Currawinya, called in the pleadings "the 1986 memorandum", was shown to Ms Adam in 1986 as a proposal. It contains no representation that shareholders had any revocable right to graze cattle on common property. My findings to questions one and two in my first judgment make clear that there was no such right. All that the 1986 memorandum represents to a reader is that upon becoming a shareholder that the company would perform the contract represented by the memorandum of articles of association in accordance with its terms. Those terms include the making of rules and regulations which might modify the use that shareholders could make of common property and which might exclude its future use for grazing purposes. Had the defendants' arguments succeeded in establishing that Curawinya's constitution gave them a right to graze cattle on common property, then the representation that they seek to press out of the current articles may have had substance. But they failed on that argument. No representation arises from the current articles.

Nor does any representation arise from the other documents that Ms Adam was shown. None of these documents assist her case.

(a) The Design Farm Document of 25 August 1975 . This document is inconsistent with any contention that Currawinya's shareholders had an irrevocable entitlement to graze cattle on its common property. It clearly contemplates the future cessation of cattle grazing. It is the foundation document which was designed to attract shareholders to invest in the acquisition of Currawinya. The later documents from the same period should best be read having regard to it.

(b) Minutes of the 4 September 1982 Meeting . This document says nothing about how Currawinya was to be administered as a company under its articles of association adopted in May 1986. The 4 September 1982 minutes do not mention cattle. Nor do they make any statements about how Currawinya's common property should be used by shareholders. The minutes relate to an outdated legal structure in which Mr Murray Slavin was holding Currawinya's land as trustee for the company when the decision making structure for Currawinya was thought to involve a voluntary association. It assumes in places that occupiers of Curawinya have a direct equitable interest in the property outside the corporate structure by reference to their individual contributions to the acquisition of the land. The 4 September 1982 minutes reflect a compromise reached among Currawinya's then occupiers and describes itself as "a sincere and successful attempt to break the impasse that has bedevilled Currawinya's history since 1976". This compromise was superseded by more enduring structural change in 1986. In my view the 4 September 1982 minutes did not make a representation to the defendants to rely upon for any purpose related to the operation of the company's constitution. Ms Adam may well have not understood the profound clarification to the rights of members that occurred when the current constitution was adopted in May 1986, just before she and her brother purchased their share. But she had notice of the change. It was open to her to obtain legal advice about it.

(c) The other documents. None of the other documents that the defendants relied upon provide any support for the making of a representation to the effect that by reason of being shareholders the defendants were "able to graze cattle on the land at the time they held shares in the company". Mr Slavin's report of 12 September 1978 says nothing about the grazing of cattle or the use of common property. The minutes of meeting of 15 May 1979 assume that some grazing of domestic animals will occur on parts of Currawinya but those minutes make no representation that this situation will continue indefinitely. The minutes of the meeting of 25 November 1981 say nothing about the use of Currawinya's common property. They refer to a contemplated form of ownership that never came to pass, "once the free holding is complete, the company will hold the land in trust for a voluntary association (made up of all the shareholders). These minutes speak to a structure which never existed.

The defendants also claim a representation is made that they were able to graze cattle on the land for the whole time they held shares in the company from the fact that there were domestic animals grazing on common property up until the time they purchased their share from Mr Bordet. In my view all that this circumstance shows is that the company had given permission for the time being for domestic animals to be grazed on Currawinya's common property. This circumstance was not in itself a basis to infer that that permission would continue for as long as the defendants remained shareholders.

There are yet other problems with the misrepresentation case. The Court is reluctant to infer any representation of the kind alleged, when the transaction in which the defendants' share was acquired was a private sale from Mr Bordet undertaken outside the sale mechanism mandated by Article 103 of the current Articles (requiring proposed sales to be made through the company). The defendants' private dealings with Mr Bordet were not consistent with this mechanism. It is difficult to infer that the defendants were the objects of any representation from the company or authorised by it in respect of a sale being undertaken contrary to its procedures. I accept the company's case that until about 1993 it had no knowledge that the defendants had acquired Mr Bordet's share. For example the minutes of the 1991 annual general meeting refer to a share registered to Mr Bordet, without any reference to the defendants. The company's secretary wrote to shareholders on 11 November 1992 referring to amounts due in relation to the share owned by Mr Bordet. The evidence supports the conclusion that some general information had come to the attention of individual shareholders that Mr Bordet had sold his share. But the company had not been officially informed of it.

I conclude that the representation that the defendants allege that the company made to them that they were able to graze cattle on the land for the time they held shares in the company is not made out.

Estoppel

The defendants' estoppel case relies upon the same facts as the misrepresentation case. The defendants say that the plaintiff's alleged representations created an assumption on the defendants' part that they were entitled to graze cattle on common land. The estoppel is completed by the defendants pointing to their purchase of the shares and other conduct, as acting to their detriment in reliance upon assumption so created.

For the reasons expressed in relation to the defendants' misrepresentation claim, the defendants' estoppel claim also fails for want of proof that a representation was made founding the estoppel. Equally, I am not prepared to infer that the defendants acted to their detriment on the basis of any such representations.

The defendants have not made out one element of the estoppel case which is additional to the misrepresentation case. The estoppel case depends upon a contention that the matters pleaded entitle the defendants to make "an assumption that a lease would be granted to them permitting inter alia the cross claimants to graze cattle on the common land". The estoppel pleaded appears to be an equitable estoppel of the type accepted by the High Court in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 399; (1988) 76 ALR 513. An element of such estoppels, attracting the intervention of equity as a court of conscience, is that the defendant knew or intended the plaintiff to act or abstain from acting in reliance on the relevant assumption or expectation: Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 per Brennan J at 428-9. Here the defendants have not established this element. The company did not know anything of their purchase from Mr Bordet until about 1993. There cannot have been any unconscientious inducement of the defendants to hold the relevant assumption.

14 Claims for Damages and Orders under the Trade Practices Act

Question 14 asks what damages the defendants have suffered by reason of any breaches of the agreement referred to in question 10 and in relation to any false representations referred to in question 12. The Court has not found any breach of the agreement pleaded in the Cross Claim. Nor has the Court found any misleading conduct on the part of the company nor any basis for a claim in estoppel against it. Accordingly, the defendants' claim for Trade Practices Act, s 87 relief also fails. It is unnecessary therefore for the Court to consider whether those claims for relief are out of time as has been pleaded in the Defence to Cross Claim.

In final submissions the defendants limited this claim for damages to such amount as may be found to be payable by them on the Statement of Claim for the alleged trespass. But as these reasons already show the company's claim for damages for trespass has also failed.

15 & 16 Oppression and Winding Upon the Just and Equitable Ground

The defendants advanced their Cross Claim for relief against the alleged oppressive conduct of Currawinya's affairs, if their interpretation of Currawinya's constitution were upheld. The Court has not upheld that claim. So the claim for relief under Corporations Act , ss 232 and 233 falls away. It is not desirable for the court to make any findings as to its subject matter because the claim may re-emerge at some future time, unless the Court's current findings lead to a final resolution of the differences between the parties.

The defendants supplied detailed particulars of their claim of the oppressive conduct of Currawinya's affairs. The principal events said to constitute the oppressive conduct occurred during the period 1999 to 2005. Their effects are said to continue. But the allegations of oppression are so connected with the defendants' allegations that they had a right to graze cattle on common property that, if any claim for oppression were now to be pursued, it would need to be substantially re-formulated. The oppressive conduct alleged in the company's affairs included the 13 March 1999 resolution, the charging of agistment fees, the commencement of these proceedings and the failure to provide the defendants with a lease. There were others too. But these allegations now look substantially different as a result of these reasons. It may be these allegations are not to be pursued any further. I will allow a short period for the defendants to indicate what course they propose to take in relation to this claim.

17 Relief, Mediation and Costs

There is much to be done as a result of this judgment to regulate future legal relations between the company and the defendants. For example, the company will presumably set about issuing a lease to the defendants in a form that conforms to these reasons. The defendants too may have to prepare themselves for the possibility that the company creates a valid rule or regulation under memorandum clause 2(a)(iii) that excludes cattle from common areas.

Aspects of this litigation remain unresolved. Principal among these is the question of costs. The plaintiff has been successful on some issues and the defendants on others. The costs outcome of the proceedings will be the subject of contest. For example, it may be argued by each party that, whatever the formal outcome, that the proceedings have in substance either been occasioned or been prolonged by the conduct of the other party. Directions for a timetable of submissions on costs will need to be provided for in short minutes of order.

I am minded to order, pursuant to Civil Procedure Act 2005, s 26, that mediation now occur between the parties. Before directing mediation I will give the parties an opportunity to put submissions, as to whether or not such an order should be made. The Court has power to make such an order whether or not the parties consent. I will not make such order without hearing from the parties further because I do not know whether such attempts have already been tried in recent times and failed. It may be that these reasons for decision creates sufficient clarity for the future organisation of Currawinya's affairs and of the respective legal rights of the company and the defendants, that there is some real prospect that mediation will be successful in the future when it has not been in the past. I regard mediation as highly desirable at this point. Relations between the parties to the proceedings are very bitter. This legal dispute is very protracted, relating as it does to resolutions passed in 1999. It is far better that the parties spend their resources on improving Currawinya than on further legal disputes. In considering the possibility of mediation and their future relations the parties could do a great deal worse than pay regard to the words of the great late eighteenth century Anglo-Irish statesman and philosopher, Edmund Burke who said of compromise in another context, "All government, indeed every human benefit and enjoyment, every virtue, and every prudent act, is founded on compromise and barter".

Conclusions and Orders

In conclusion, I have found that the 13 March 1999 resolution passed in general meeting did not create a valid rule or regulation under Currawinya's memorandum of association clause 2(a)(iii). It was not effective in my view, to prevent the defendants from utilising the company's common property by the grazing of cows pursuant to a licence to do so which they enjoyed. I have found that the company's trespass claim fails. But I have also found that the 13 March 1999 resolution does not modify any rights to a class of shares of which the defendants are the sole members. Nor do the defendants' contract claim, misrepresentation claim, or estoppel claim succeed. I have found that the defendants were not entitled to the lease to which they claim to be entitled. But on the other hand the company has not offered a lease to the defendants, or indeed any other shareholders in conformity with the company's constitution. Nor did the company mislead the defendants about their right to graze cattle on Currawinya when they acquired their shares from Mr Bordet in 1986.

The parties should provide submissions: as to the future course, if any, of the defendants' claims under Corporations Act, ss 232 and 233; as to whether or not the proceedings should be mediated at this point and finally as to questions of costs.

I direct the parties to bring in short minutes of order to give effect to these reasons.

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Decision last updated: 09 February 2011

Medium Neutral Citation:	Currawinya Pty Limited v Adam; Adam v Currawinya Pty Limited [No. 2] [2011] NSWSC 1
Hearing dates:	9 September 2010
Decision date:	28 January 2011
Before:	Slattery J
Decision:	In conclusion, I have found that the 13 March 1999 resolution passed in general meeting did not create a valid rule or regulation under Currawinya's memorandum of association clause 2(a)(iii). It was not effective in my view, to prevent the defendants from utilising the company's common property by the grazing of cows pursuant to a licence to do so which they enjoyed. I have found that the company's trespass claim fails. But I have also found that the 13 March 1999 resolution does not modify any rights to a class of shares of which the defendants are the sole members. Nor do the defendants' contract claim, misrepresentation claim, or estoppel claim succeed. I have found that the defendants were not entitled to the lease to which they claim to be entitled. But on the other hand the company has not offered a lease to the defendants, or indeed any other shareholders in conformity with the company's constitution. Nor did the company mislead the defendants about their right to graze cattle on Currawinya when they acquired their shares from Mr Bordet in 1986. The parties should provide submissions: as to the future course, if any, of the defendants' claims under Corporations Act, ss 232 and 233; as to whether or not the proceedings should be mediated at this point and finally as to questions of costs. I direct the parties to bring in short minutes of order to give effect to these reasons.
Catchwords:	CORPORATIONS - constitution and replaceable rules - types of companies - construction of constitution - company incorporated for multiple occupancy living in a rural environment - dispute about members' right to use common property for grazing cattle - constitution does not grant a right to graze cattle on common property to members - whether resolution of members passed in March 1999 is effective to withdraw permission to graze cattle on common property - whether resolution modifies class rights in contravention of procedure prescribed under the company's constitution - whether company's affairs conducted oppressively - application for winding up company adjourned so parties can modify their affairs on the basis of the Court's judgment - HELD - resolution not effective to withdraw permission to graze cattle resolution is not a rule or regulation under memorandum of association clause 2(a)(iii) - no interference with class rights TORTS - trespass - trespass to land - defence of licence to enter property - whether defendants liable in trespass to the company for grazing their cattle on common property - HELD - defendants not liable in trespass as existing permission to graze cattle on common property not validly withdrawn by members resolution of March 1999 CONTRACTS - general contractual principles - whether company has breached contract with member by failing to issue lease to member in conformity with company's constitution - HELD - no breach found MISLEADING AND DECEPTIVE CONDUCT - whether company misled members about the right to graze cattle on common property - HELD - no misleading or deceptive conduct found.
Legislation Cited:	Animals Act 1977 Civil Procedure Act 2005 Corporations Law Corporations Act 2001 Crown Lands Consolidation Act 1913 Trade Practices Act 1974
Cases Cited:	Amalgamated Investment & Property Co Ltd (in liquidation) v Texas Commerce Bank Ltd [1982] QB 84 Barker v R (1983) 153 CLR 338 Canas Property Co Ltd v KL Television Services Ltd (1970) 2 QB 433 City Pacific Limited v Bacon (No 2) (2009) 178 FCR 82 Clifton Securities Limited v Huntley [1948] 2 All ER 3 Cook v R & M Reurick Holdings Ltd [2004] NSWCA 268 Cumbrian Newspapers Group Ltd v Cumberland & Westmoreland Herald Newspaper & Printing Co Ltd [1987] Ch 1 Cummings v Macks (2000) 96 FCR 345 Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666 Fink v Fink (1946) 24 CLR 127 Fischer v Easthaven Limited (1964) 80 WN (NSW) 1155 Grundt v Great Boulder Pty Ltd (1937) 59 CLR 641 Lidsale Nominees Pty Ltd v Elkharadly [1979] VR 84 Magill v Santina Pty Limited [1983] 1 NSWLR 517 Nevin v B and R Enclosures [2004] NSWCA 339 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Re Broadway Motors Holdings Pty Limited (in liquidation) (1986) 6 NSWLR 45 Ryan v Edna May Junction Gold Mining Co NL (1916) 21 CLR 487 Sommerhalder & Sommerhalder v Burjan & Feigl [1962] SASR 271 Thompson v Ward (1953) 2 QB 153 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Viviano v Natoli & Ors (1998) 43 NSWLR 695 Wilson v Meudon Pty Ltd (2006) ANZ ConvR 93 Yakamia Dairy Pty Ltd v Wood [1976] WAR 57
Category:	Principal judgment
Parties:	Currawinya Pty Limited (Plaintiff/Cross Defendant) Jill Adam (First Defendant/First Cross Claimant)
Representation:	Counsel: Mr G Elliott (Plaintiff/Cross Defendant) Mr J Priestley (Defendant/Cross Defendant) Solicitors: Steve Bolt, Bolt Findlay Solicitors & Mediators (Plaintiff/Cross Defendant) James Fuggle, Rummery Solicitors (Defendant/Cross Defendant)
File Number(s):	09/4848 06/6350