Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd

[2010] NSWSC 666

CITATION:	Currawinya Pty Limited v Adam; Adam v Currawinya Pty Ltd [2010] NSWSC 666 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	16/11/09, 17/11/09, 18/11/09, 19/11/09, 8/12/09
JUDGMENT DATE :	2 August 2010
JURISDICTION:	Equity
JUDGMENT OF:	Slattery J at 1
DECISION:	Conclusions and Orders 1. In the result I have found that clause 2(a)(i) of Currawinya’s Memorandum of Association does not confer on the defendants a liberty to graze cattle on Currawinya. The company gives the defendants a license to occupy common property subject to the company’s rules and regulations in relation to the conduct of activity on that common property. The only relevant requirement upon the company for making such rules and regulations relating to common property was that they apply equally to all members. 2. I have further found that the Agricultural Tenancies Act 1990 does not apply to the dispute between the company and the defendants, which dispute is within this Court’s jurisdiction. However, in the light of these findings the validity of the resolution in general meeting of 13 March 1990 needs to be the subject of further submissions to ensure procedural fairness, as I have explained above, to determine whether not it was a valid exercise of the company’s power to make rules and regulations with respect to common property. It seems to me that the combination of findings in these reasons was not entirely anticipated in the parties’ submissions. 3. I direct the parties to provide written submissions upon the issues I have identified within four weeks.
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 the grazing of cattle - constitution does not grant a member the right to graze cattle on common property - consideration of application of Agricultural Tenancies Act 1990 - Act does not apply.
LEGISLATION CITED:	Agricultural Tenancies Act 1990 (NSW) ss 5, 21, 21 (2)(b), 22 Agricultural Tenancies Regulation 2006, r 4 Corporations Act 2001, ss 140, 232, 233, 258B (1) Strata Schemes (Freehold Development) Act 1973
CATEGORY:	Principal judgment
CASES CITED:	Dowse v Wynyard Holdings Ltd [1962] NSWCR 252 Gosford RSL Club Co-Operative Ltd v Commissioner of Land Tax (NSW) (1981) 11 ATR 805 Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 Crumpton v Morrine Hall Pty Limited (1965) 82 WN (Pt 1) (NSW) 456 Dowse v Wynyard Holdings Ltd [1962] NSWR 252 Gosford RSL Club Co-Operative Ltd v Commissioner of Land Tax (NSW) (1981) 11 ATR 805 H H Halls Ltd v Lepouris (1965) 39 ALJR 259 Magill v Santina Pty Ltd (1983) 1 NSWLR 517 Newcastle City Council v Royal Newcastle Hospital [1959] AC 248 Plimmer v Wellington City Corporation (1884) 9 App Cas 699 R v Assessment Committee of St Pancras (1877) 2 QBD 581 Ramsden v Dyson & Thornton (1866) LR1HL 129 Wilson & Anor v Meudon Pty Ltd & Anor [2005] NSWCA 448
PARTIES:	Plaintiff/Cross Defendant-Currawinya Pty Limited First Defendant/ First Cross Claimant- Jill Adam Second Defendant/Second Cross Claimant - Arthur Bickmore
FILE NUMBER(S):	SC 09/4840, 06/6350
COUNSEL:	Plaintiff/Cross Defendant- Mr G Elliott Defendant/Cross Claimant-Mr J Priestley
SOLICITORS:	Plaintiff/Cross Defendant- Defendant/Cross Claimant-James Fuggle Rummery Solicitors

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SLATTERY J

MONDAY, 2 AUGUST 2010

6350/06 CURRAWINYA PTY LIMITED v ADAM
4840/09 ADAM v CURRAWINYA PTY LIMITED

JUDGMENT

1 HIS HONOUR: Currawinya Pty Limited is the registered proprietor of approximately 6,200 acres of picturesque rural land located west of Casino and close to the small town of Tabulam in northern NSW. Currawinya has a total issued share capital of 25 shares. Currawinya’s constitution authorises the allocation of a designated 20-acre portion of the company’s land for each shareholder’s living area. The balance of the company’s land serves as common property that is available to all shareholders in accordance with Currawinya’s constitution. Ms Jill Adam and Mr Arthur Bickmore jointly hold one share in Currawinya. The fundamental issue in these proceedings is the extent of their entitlement as single shareholders in the company to enjoy Currawinya’s common property. They claim a present right to graze cattle on the common property. Currawinya says that they have no such right.

2 Currawinya was conceived and established as a company to provide multiple-occupancy living in a rural environment for its shareholders. The sharing of space on a rural property regulated by the constitution of a company such as Currawinya risks conflict between shareholders with different expectations about their respective entitlements to enjoy common property. That risk is realised here. Ms Adam and Mr Bickmore are at issue with all Currawinya’s other shareholders about their entitlement to graze cattle. This dispute is resolved in these reasons by reference to Currawinya’s constitution and the general law.

Background to the dispute

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


17 ^th January 2005

To:
G. Bickmore
14 Queen Elizabeth St
Coriki NSW 2471

Date	Details	Amount
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, was 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.

The Issues

18 The Court directed the parties to attempt to agree upon the issues for trial. As a result the parties formulated nine primary questions for determination that provide the structure for this judgment. In the event that these questions are answered in a way that may support a grant of Corporations Act ss 232 and 233 relief, then that aspect of the defendants’ cross claim will also arise for consideration. The nine questions for determination are set out.

(1) Whether the constitution provides a right to graze cows on common land?

(2) Did the decision to withdraw permission to graze cattle on common land require unanimous shareholder consent under clause 4 of the constitution?

(3) Does section 5 of the Agricultural Tenancies Act 1990 (NSW) confer a right on the defendants to have their agreement with the company in relation to their tenancy reduced to writing signed by the company and if so what is the consequence of the company failing to do so?

(4) Does section 21 of the Agricultural Tenancies Act and the amount in dispute mean that the present proceedings should be arbitrated rather than determined by the Court?

(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?

19 These issues are determined in these reasons in the above order.

(1) The right to graze cows on common land

20 The first agreed issue between the parties is expressed to be whether or not Currawinya’s constitution provides a right to shareholders to run cattle on common areas. The defendants argued that it did. The defendants also argue that their rights to graze cattle on common areas arose other than under Currawinya’s constitution. This first issue considers the defendants claim under Currawinya’s constitution. Their claim to grazing entitlements on a basis outside Currawinya’s constitution is considered with a subsequent issue.

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 Proprietory 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 aurthorise 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 Proprietory Lease every such adjustment shall be made against or in favour of all members and Proprietory 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 Proprietory 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.”

Applicable Legal Principles

23 The constitution of Currawinya has been customised from a form of company constitution that is commonly used for home unit companies. Currawinya’s constitution appears to have been crafted to meet the specific needs of the occupants of its natural rural environment. General principles of law derived from the cases relating to home unit companies assist in analysis of the rights arising under Currawinya’s constitution, but as Bryson JA says in Wilson & Anor v Meudon Pty Ltd & Anor [2005] NSWCA 448 at [18], "Generalisations are no more than they are, and the constitution of each home unit company must be considered separately."

24 An entitlement to occupy land pursuant to the constitution of a home unit company or a company such as Currawinya (“company title”) creates impediments for the occupant of the land that do not exist with other title mechanisms such as strata title under the Strata Schemes (Freehold Development) Act 1973. Company title mechanisms perform functions that are not performed by for example the strata title mechanism or at least are performed differently.

25 Forms of company title, for example, enable existing shareholders to control who may obtain shares in the company in a way that is not ordinarily possible under the strata title mechanism: Magill v SantinaPty Ltd (1983) 1 NSWLR 517 at 528D per Mahoney JA. Controls on the transfer of shares in Currawinya are created in articles 99 and 103 of Currawinya’s constitution. Article 99 of the company’s articles of association allows 80% of Currawinya’s members to direct the company’s board to refuse to register a transfer of shares in the company to any person “of whom they do not approve” without any obligation to provide reasons for the refusal. Article 99 operates subject to Article 103, which confers pre-emptive rights on members other than the transferring member. The law is clear that to the extent that the board itself is exercising a discretion not to approve a transfer that, like the exercise of its other powers, provided the board exercises the power honestly and in the interests of the company, it is not reviewable in the courts: Magill v SantinaPty Ltd (1983) 1 NSWLR 517 at 527B per Glass JA.

26 Company title also allows control to be exercised over the conduct of those occupying space on the company’s land in a way and to an extent different from that provided for under other title mechanisms: Magill v SantinaPty Ltd (1983) 1 NSWLR 517 at 528D per Mahoney JA. Currawinya’s constitution makes provision in its memorandum clause 2(a)(iii), as home unit companies commonly do, for rights of use and occupation to be exercised 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 all such rules and regulations affect all equally.

27 Company title also provides some freedoms from regulatory constraint. It can be a means of enabling multiple occupancy without the need to negotiate various local government legal controls: Wilson & Anor v Meudon Pty Ltd & Anor [2005] NSWCA 448 at [66]. Whether clause 2(a) of Currawinya’s memorandum creates an interest in land is, as Bryson JA observed of a clause serving a similar function in Wilson & Anor v Meudon Pty Ltd & Anor [2005] NSWCA 448 at [66], “unlikely to have passed without the close attention of those drafting and adopting [it as] words which unmistakably create leasehold interests are ready to hand, but their use brings with them various legal consequences, possibly including rating, local government voting and other entitlements and obligations, and also possibly encountering legal controls on subdivision.”

28 But this freedom from regulatory constraint comes at a price. Home unit companies do not themselves ordinarily create interests in land. It is strictly a misnomer to describe them as constituting a form of “company title”. The constitutions of home unit companies rarely have any specific wording formally granting title; there is often a lack of clarity in the term of the title; and, the grant of the right of occupation is often for a term and upon conditions that are in the discretion of the company: H H Halls Ltd v Lepouris (1965) 39 ALJR 259 at 260-261. Currawinya’s constitution contains many of these features as the analysis below indicates.

29 The law recognises some differences in character between home unit companies and other companies in the interpreting of their constitutions. Home unit companies are not like ordinary companies being a “commercial venture in which a number of people contribution to a fund of a stock which the company trades”, but rather they are an enterprise in which the company’s assets are made available to members for the members’ own use: Wilson & Anor v Meudon Pty Ltd & Anor [2005] NSWCA 448 per Bryson JA at [16]. The legal discourse about these companies primarily concerns the rights of shareholders to their individual lots. Earlier controversy about the capacity of a company to grant such rights is now resolved. A company with a constitution may grant a shareholder, as a shareholder, a right to occupy or use real property that the company owns, or holds under lease, whether the right is a lease or licence or a contractual right: Corporations Act, s 258B (1). The company’s power to pass resolutions causing undue interference to those rights is limited. Where those rights are attached to a unit by reason of the constitution of the company constituting class rights, then the units constituting that class must approve the resolution: Wilson & Anor v Meudon Pty Ltd & Anor [2005] NSWCA 448. Difficult questions can sometimes arise as to what constitutes a class of shares for this purpose as they did for example in Wilson & Anor v Meudon Pty Ltd & Anor [2005] NSWCA 448. Aspects of this law are considered in more detail in relation to question (2) below.

30 Shareholders generally have a liability to contribute to the annual running costs of the company over and above their limited liability to contribute to the capital of the company. This liability is provided for in Currawinya’s constitution in Article 2 (a)(vii).

31 The constitution of the home unit company is a contract between the company and its members and is also a contract among the members themselves. This is now relevantly provided for by statute for all companies. Companies Act s 140(1) provides that a company’s constitution and any replaceable rules that apply to the company “have effect as a contract” between members and the company and members “under which each person agrees to observe and perform the constitution and rules so far as they apply to that person”. But a member is not bound by a modification to the constitution to which the member had not agreed in writing which requires the member to take up additional shares, which increases restrictions on the member’s right to transfer shares or which “increases the members liability to contribute to the share capital of, or otherwise to pay money to the company”: Companies Act s 140(2). Articles of association operate with contractual force between the company and its members so far as they confer rights and duties upon the latter in their capacity as members but they have no contractual force as regards provisions conferring rights and duties upon members otherwise than in that capacity: Magill v SantinaPty Ltd (1983) 1 NSWLR 517 at 524F-G per Glass JA. The articles in a home unit company allocating rights of enjoyment of particular areas of the company’s land in association with particular shares, does relate to members in their capacity as such, as was accepted by Jacobs J in Crumpton v Morrine Hall Pty Limited (1965) 82 WN (Pt 1) (NSW) 456, at 459 and see also Magill v SantinaPty Ltd (1983) 1 NSWLR 517 at 525A per Glass JA.

32 Terms ordinarily descriptive of land title in the constitution of home unit companies should often be interpreted cautiously. The mere use of words such as “lease”, “tenant” and “rent” in the constitution of a home unit company is not necessarily determinative of the nature of the relationships described. Such words are often used loosely in home unit company constitutions (Wilson & Anor v Meudon Pty Ltd & Anor [2005] NSWCA 448 at [64]) or may have to be read with a different meaning (for example “tenants” was a misnomer for “licensees’ in the constitution under examination in Magill v SantinaPty Ltd (1983) 1 NSWLR 517 at 526F per Glass JA).

33 Another issue that commonly arises in the operation of company title mechanisms is the nature of the title conferred, when either deliberately or through inadvertence, a formal lease or other mechanism conferring title contemplated by the company's constitution has not been put in place after incorporation and the taking up of possession by members. That is a relevant issue here. Although a homestead area on Currawinya’s land was designated for the defendants’ occupation, no lease in respect of their designated area was ever executed between them and Currawinya. The next section of these reasons is a brief excursus into the evidence, which shows what steps were taken towards Currawinya leasing a designated area to the defendants but recording its ultimate failure to do so.

34 A shareholder has rights against a home unit company when the company has not issued to the shareholder the lease contemplated by the company's constitution. Articles that assume that a member may have a grant of a lease over a particular area of the company's property, are generally inconsistent with the articles themselves constituting an estate or interest in the property of the company: H. H. Halls Ltd v Lepouris (1065) 39 ALJR 259. Where no lease is granted and the articles do not of their own force contain a demise from the company to the shareholder, the construction of the relevant articles should be approached upon the footing that the shareholder is entitled by contract to the occupation of the shareholder’s own area as an exclusive licensee: Magill v SantinaPty Ltd (1983) 1 NSWLR 517 at 525D per Glass JA. A shareholder in these circumstances may also have rights in equity to call for the execution of the form of lease contemplated by the company’s articles. This right is discussed in relation to the defendants’ situation in the course of the excursus below in relation to this issue.

The absence of Proper Lease Formalities

35 Although Currawinya’s memorandum of association was adopted in 1986 it took until 1993 before the allocation of designated areas to particular members was sought to be regularised in some fashion to conform with memorandum of association clause 2(a)(i)(iii). At a general meeting on 25 September 1993 Currawinya’s members considered the allocation of home sites and the issuing of proprietary leases in a series of motions to the following effect:

“ HOMESITES
MOTION 28 : That homesite plans submitted by shareholders R. &. Gould, S. & W. Gith, J. & P. Johnston, C. & P. Liehne, K. Fabian, A. & P. Clarke, R. Evans & B. Gibson, J. Adam & G. Bickmore, be approved.
(P. Liehne, G. Rabach) CARRIED.

MOTION 29 : That resident shareholders who have commenced development of their home sites be given until the next A.G.M. to submit home site plans for approval. (P. Liehne, P. Clarke) CARRIED.

MOTION 30 : That to prevent overcrowding and to assist in forward planning, a committee of resident shareholders be charged with the task of identifying and mapping eight (8) recommended home sites for approval at the next A.G.M. New residents should be requested to choose a site from those listed. (G. Rabach, P. Liehne) CARRIED.

PROPRIETARY LEASES

MOTION 31: That provision of a home site map and payment of annual levies be accepted as fulfilling those requirements under Clauses 2ai-iv of the Memorandum of Association with proprietary leases. (P. Liehne, P. Johnston) CARRIED.”

36 It is evident from Motion 28 that by 28 September 1993 the defendants had submitted a home site map of their area for approval. The defendant’s submission of a map to the company in 1993 was designed, at least loosely, to conform with the mechanism for designation of areas for their exclusive occupation provided for by clause 2(a)(ii) and (iii). An entitlement to occupy a designated area, which arises by force of clause 2(a)(ii), could only work if there was a definition of the perimeter of the designated area to be occupied by each member. Clause 2(a)(iii) is crafted to provide a mechanism for the company and its members to agree about the designated area. It limits the area that may be designated for a particular member’s occupation to one reserved by that member when seeking a share allotment. The defendants did not comply precisely with clause 2(a)(iii) in designating an area for their exclusive occupation at the time they took a transfer of share in the company in 1986. Nevertheless in late 1993 many members were seeking to reserve and submit home site areas to the company to have the company formally designate those areas to them under clause 2(a)(ii). Among those members the defendants submitted a home site plan.

37 Evidence of the defendants’ home site plan was not attached to the minutes of the meeting on 25 September 1993. Nor was their home site plan identified in those minutes as having been put before the general meeting. Nevertheless the map was not the subject of contest in these proceedings.

38 The defendant’s relevant home site plan, in the form of a large map of the district map with superimposed lines (Ex A 327) is in evidence. Currawinya’s common seal is affixed to it, witnessed by Mr Worrall and one other. It is unnecessary to describe the home site map in detail in these reasons. The defendant’s designated area on the map appears to be defined in hand drawn boundaries on the map’s contour lines. It would be very difficult to use these hand drawn lines to ascertain the precise boundary of the defendant’s designated area on Currawinya without a survey. But that is not a matter in contest in these proceedings.

39 Although Motion 28 at the meeting on 25 September 1993 “approved” the defendants’ home site plan. The further process of having the map so submitted being “accepted”, took place at an adjourned general meeting held on 31 August 1997:-

“Motion 3 : That the Home site map submitted by G. Bickmore and J. Adam be accepted. (S. Gould, S. Canning). Carried: 9 for, 3 against, 1 abstain.”

40 The intended operation of Motion 31 passed by the company in general meeting on 25 September 1993 is obscure. But to the extent that the legal effects sought to be secured by Motion 31 were conditional, the defendants appear to have fulfilled the stipulated conditions. The defendants had already submitted a map (or at the latest did so by the meeting in which the map was accepted on 31 August 1997). Secondly, the defendants paid annual levies throughout this early period. The company’s ledger account for levies accrued by the defendants shows a nil balance with no arrears as at 11 October 1997 and 7 October 1998. Various other nil balances occur in their accounts after these dates showing the defendants keeping up to date with their early levies to the company.

41 No lease was executed between the company and the defendants in relation to their designated area. The members seem to have regarded the passing of these motions as sufficient to secure the tenure they desired for their designated areas pending their execution of formal leases. The steps taken were sufficient to create an exclusive licence between the company and individual members over the designated areas: Magill v SantinaPty Ltd (1983) 1 NSWLR 517 at 525D per Glass JA. But the steps were not sufficient to grant a lease. Motion 31 does not use words of demise nor does it contain terms such as the rent or the precise term of the lease that would be essential to constituting a demise.

42 The rolled up form of Motion 31 was designed to assign a designated area to each member in conformity with memorandum clause 2(a)(iii); to confer the direct entitlement provided for by clause 2(a)(ii) to the use and occupation of that designated area; and, to record that the members concerned had fulfilled some of the preconditions for the grant of a lease of that designated area to them in conformity with clause 2(a)(i). The defendants have occupied their designated area with the acquiescence of the company. What occurred is consistent with the grant at common law of an exclusive licence to the defendants to the use and occupation of their designated area.

43 But in equity the defendant probably acquired other rights that were not in direct contest in these proceedings. I mention these without having to decide their full scope. As a consequence of my decision in these reasons negotiations may need to take place between the parties about many matters including the issue of the defendants’ tenure of their designated area. It is at least arguable that the defendants have acquired rights over their designated area and for access to their designated area in the nature of those identified in Ramsden v Dyson & Thornton (1866) LR1HL 129 and Plimmer v Wellington City Corporation (1884) 9 App Cas 699. Equity will bind the owner of a property who induces another to expect that an interest in the property will be conferred upon that other causing that other to expend money on the property. It might be argued on behalf of the defendants that they expected the company to grant them a lease of their designated area upon terms that are yet to be finally negotiated and that they expended money and developed their designated area on this basis. They may be entitled in equity to call for a lease to be granted to them. But this will be subject to the company’s right to prescribe the form and term of such lease in accordance with their agreement with the company recorded in memorandum clause 2 (a)(i). In the event that the company and the defendants cannot agree upon the terms of such a lease the Courts jurisdiction to give relief can be wide enough to settle those terms.

44 Before returning to the construction of memorandum clause 2(a)(i) one comment is appropriate. The company and the defendants are arguing in this case about the nature of the defendants’ rights to use the common property, not the right to use the defendants’ designated area. The company could have insisted on more formal steps to settle a standard form of lease between itself and its members and require that the lease be executed before the defendants occupied their designated area. One of the issues that would have been most likely to be presented in the course of settling a lease is the need for a final definition of the nature of members’ rights over common property. The failure to take these formal legal steps upon advice at the appropriate time has contributed to the dispute that now exists before the Court.

Members’ Rights to Occupy Common Areas

45 The first question is whether Currawinya’s constitution itself confers a right on the defendants to graze cattle on common property. In the absence of a formal lease between the company and the defendants dealing with rights to occupy and to graze cattle on common areas the defendants sought to establish memorandum of association clause 2(a)(i) as their source of a right to occupy and graze cattle upon common property. The company contended that a member’s rights of occupation of common property only arose from leases executed between the company and its members and in the absence of a formal lease dealing with the issue there was no such right. The company claims in the alternative that if the defendants do have a right of occupation of common areas derived directly from memorandum clause 2(a)(i) that the content of such right does not include the activity of grazing cattle on those areas. The company's alternative submission is dealt with in the next section. First though it is necessary to construe clause 2(a).

46 The company's principal submission as to the construction of clause 2 (a) is substantially correct. My construction of clause 2(a) is set out below. The reasons why the defendants’ construction of clause 2(a) is unsuccessful are dealt with in the course of and at the conclusion of explaining my construction of the provision.

47 It is useful first to look at how clause 2(a) operates with respect to designated areas and then with respect to Currawinya’s common property. Clause 2(a)(i)-(iii) are the provisions in primary focus. Clause 2(a)(i) contemplates that an area reserved by a member and designated by the company in accordance with clause 2(a)(iii) will be leased to the member to which it is assigned. Designated areas "shall be leased to members of the company… under leases in such form and for such term 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." As with many home unit companies clause 2(a)(i) does not contain words of demise. The entitlement as against the company to occupy designated areas arises by a lease.

48 Until a clause 2(a)(i) lease is executed, the member concerned does have the benefit of contractual rights against the company upon the terms of Currawinya’s constitution and specifically has rights in relation to the member’s designated area provided for in clause 2(a)(ii). But the purely contractual rights that the constitution confers to designated areas are quite limited in the absence of a lease. Clause 2(a)(ii) confers upon a member "owning the requisite share" that the member "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 that designated by the company to the share held by such member”. Secure as this language may sound, the right of use and occupation that clause 2(a)(ii) confers is nevertheless "subject to and in accordance with the provisions of this memorandum…". The clause 2(a)(ii) right is subject to the grant of a lease under clause 2(a)(i). That this is so is supported by the concluding language of clause 2(a)(ii) that the entitlement to be exercised under clause 2(a)(ii) is to exercised "in such form and for such term or terms as shall be prescribed by the Company", which closely echoes the language of the company's clause 2(a)(i) obligation to lease designated areas to members "under leases in such form and for such term shall be prescribed by the company".

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 SantinaPty 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).

55 It is now necessary to turn to the defendant's arguments upon the construction of clause 2(a)(i).

56 The defendants contend that clause 2(a)(i) entitles a member “to occupy” the balance of the land not designated for sole occupation. They say that although the clause provides for the leasing of a designated area to be inhabited exclusively by its member, the member’s right to occupy common property is not contingent upon execution of a lease from the company. This contention of the defendants is partly right. I have found that the member's right to occupy common property is a contractual licence, which may accompany the exclusive contractual licence of the member to occupy a designated area. To that extent a member's right to occupy common property is not contingent on the existence of a lease of a designated area as an exclusive licence of a designated area will be sufficient to support the supplementary licence of common property.

57 But the defendants go further than this. They say that the language of clause 2(a)(i) supports a construction that the provision confers a right of occupation of common property that is not ancillary to either a lease or an exclusive licence of a designated area and is essentially non-revocable so long as the member who claims the right is a member. The company says that the right is ancillary to a lease and is revocable. This is the real point at issue between the parties on the construction of clause 2(a)(i).

58 The defendants draw attention to the following features of clause 2(a)(i). First, they say that the land that is identified as “shall be leased” is only the “designated area”. In contrast they say that the land that members are entitled to occupy in common is identified as being that land not “set aside and designated for sole occupation by a member under leases”. The defendant’s contention is that this drafting is inconsistent with the common area being subject to lease. The defendant’s further say that the balance of the land “not set aside and designated for sole occupation by a member under leases” can only refer to common areas, which are not being leased. Furthermore the defendant’s say that to the extent the leases that may be issued by the company to members are described in clause 2(a)(i), that they are described in terms entitling “the members of the company to the use and occupancy of the respective areas of land” during their terms. The defendants submit that the “respective areas” are a reference to the respective designated areas of members not the common areas. The defendants also draw support for this construction from clause 2(a)(ii) and (iii) which they say can refer only to the leasing of designated areas to members and cannot be construed as referring to the leasing of common area.

59 Much of this can be accepted. It is correct for the defendants to point out that common property is not itself leased. But in my view the language of clause 2(a)(i) is intractable; the words "together with" signal the introduction of a set of rights to common property, which will nevertheless accompany the grant of a lease. The defendants’ construction of clause 2(a)(i) is correct to the extent that they contend that the clause gives them an ultimate right to occupation of the common area of Currawinya’s land. That right is perfected when they get a licence to occupy the common property with their lease. But the defendants’ claim is incorrect that this right arises immediately out of the terms of clause 2(a)(i) itself. In my opinion clause 2(a)(i) does not operate directly to confer a right of occupation of common areas. But it has that effect indirectly by allowing a member to hold the company to the terms of clause 2(a)(i) of the memorandum, which requires a licence to common property to accompany the offer a lease or licence of a member’s designated area.

60 It is now necessary to consider the company's alternative argument.

Content of the Right to Occupy Common Areas

61 The company argues that even if clause 2(a)(i) does create a direct right to occupy common area that such a right of occupation does not include the liberty for the defendants to graze cattle on common property. The company’s case is that a shareholder’s use of common property should be limited to exclude commercial activities such as the grazing of cattle. The company relies on four arguments

62 The company’s first point is that clause 2(a)(i) only confers a right “to occupy the balance of the land” [emphasis added]. Such language does not, the company submits, confer an additional right to “use” common areas in the sense of commercially exploiting them. The company says that the distinction between the “occupation” and “use” of the common areas is sufficiently clearly drawn in associated provisions of the constitution. The constitution makes clear that a shareholder’s designated area is one in which the shareholder, by reason of the shareholding, is entitled “to use and occupy for dwelling, agricultural, grazing or such other purposes as may be approved by the special consent of members” [emphasis added]: clause 2(a)(ii). The company argues that its constitution contemplates use of designated areas for dwelling, agricultural, grazing and other purposes but that shareholders may merely “occupy” common areas. The company says that this is a common sense distinction. Designated areas for exclusive use and occupancy should be able to be used and fully exploited but related common areas can only be “occupied”; otherwise, it is said, the constitution would promote competition between individual shareholders in appropriating the common areas for their own use and private advantage.

63 Secondly the company argues that permitting cattle to graze on land does not in any event fit within the ordinary meaning of the word “occupy” common areas used in clause 2(a)(i). The company says the animals eat pasture, plants and cause damage and have an impact upon the land which goes beyond mere occupation.

64 The company’s third argument based on clause 2(a)(iii) is that the company has ultimate say in preventing shareholders grazing cattle by passing rules and regulations to that effect. Clause 2(a)(iii) provides that all rights of “use and occupation” should be subject to the constitution 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”, subject to the proviso that all such rules and regulations should affect all leases uniformly. The company says there will necessarily be conflicting claims to use common areas which from time to time the company must resolve. Clause 2(a)(iii) gives the company the requisite power to resolve these matters through the making of regulations binding on all members.

65 The company’s fourth argument is that the defendants’ claimed right to graze cattle on the common area is inconsistent with the broad rights and obligations of management conferred on the company under constitution clause 2(a)(vi)(i). The company points out that the company must budget for maintaining and upgrading land and is apparently levying an assessment against each lessee for a proportionate share of the cost of maintaining and upgrading the company’s land. This means in a practical sense that the company would need to know, for example, how many cattle would be on the common property so that it could make appropriate budgetary provision for the occupation.

66 This is a strange argument for the company to advance. It tolerated the grazing cattle on common property for well over a decade without being troubled by this problem. Nor do I accept the correctness of the four arguments set out above. The correct position, in my view, is revealed by the company’s third argument: the constitution provides for designated areas (and in my view as I have explained above, common property) to be subject to rules and regulations: clause 2(a)(iii). Those rules and regulations may make provision for a broad range of permitted and non-permitted activities that may occur when a member exercises a right “to occupy” common property.

67 The company's fourth argument can equally be deployed to support the opposite position. The company's rights of management under clause 2(a)(vi)(i) might support a broad range of activity, including commercial activity, on common property, but provided that the company’s rules and regulations governing the activity were appropriately restrictive.

68 The principal flaw in the company’s position lies in its first and second arguments. The bright line distinction the company seeks to draw between a right to "occupy" common property and a right to "use and occupy" a shareholder's designated area is difficult to maintain so as to exclude any commercial activity on common property. As the defendants point out all occupation involves some form of use. The defendants refer to authority that “occupation” requires some form of user but it is more than mere user: all buildings which are “occupied” are used for some purpose or purposes: Gosford RSL Club Co-Operative Ltd v Commissioner of Land Tax (NSW) (1981) 11 ATR 805 at 810 per Lee J. The defendants also refer to Newcastle City Council v Royal Newcastle Hospital [1959] AC 248 at 255 and R v Assessment Committee of St Pancras (1877) 2 QBD 581 per Lush J and to Osborn’s Concise Law Dictionary, that occupation is defined to include “the exercise of physical control or possession of land; having the actual use of land”.

69 For the company's argument to work it would require the constitution to be administered on the basis that common property somehow can be occupied but never used. The common property must be able to be occupied for a member’s recreation, which is clearly a “use”. The language of clause 2(a)(i) does not support the drawing of a distinction between the commercial and non-commercial uses of common property.

70 The expression in clause 2(a)(i) "use and occupancy" may perhaps refer to a level of permanent dedication of land to a particular identified purpose which is not found merely in the word "occupy". Even this distinction is hard to maintain, as the common property may be permanently dedicated to use for recreational activity.

71 Clause 2(a)(i) and (iii) entrench the rights of shareholders in relation to the use of their respective designated areas, including the right to dwell upon and commit designated areas to agriculture and grazing: clause 4. The constitution does not contemplate that shareholders will dwell upon or conduct agricultural or grazing activity on common areas. This is subject to the possible exception of rules or regulations being passed which would permit that to occur. It is not possible to ignore the distinction in wording between members being able to “occupy” common areas in clause 2(a)(i) and their right to “use and occupy” designated areas. The distinction in wording permits a distinction to be drawn in the activity permissible in each of the two areas.

72 In my opinion there is no obvious immediate constitutional prohibition in the language of clause 2(a)(i) that would prevent Currawinya’s common property being used for the grazing of cattle as the company contends. Thus, it is open to the company to licence the grazing of cattle on common property as it did for many years.

(2) Is unanimous shareholder consent required to withdraw permission to graze cattle on common land?

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.

(3) Dispute concerning right to reduce the agreement to writing

79 The issue under this question is whether Agricultural Tenancies Act s 22 deprives this court of jurisdiction to determine these proceedings. The defendants say that these proceedings are a dispute about the reduction of an agricultural tenancy to writing and Agricultural Tenancies Act s 22 operates to deprive this court of jurisdiction.

80 The company says that Agricultural Tenancies Act s 5, if applicable, confers a right on the defendants to have their agreement with the company in relation to their tenancy reduced to writing signed by the company. The company says there is no dispute about this issue. The company says that the only relevant agreement between the company and the defendants that the defendants can say should be reduced to writing is Currawinya’s constitution, which is already in writing, signed by the company by reason of the issue of a share certificate to the defendants under the company's seal.

81 To consider these competing arguments it is necessary to examine the relevant provisions of the Agricultural Tenancies Act. The relevant purpose of the Agricultural Tenancies Act is to encourage the use of written agreements for agricultural tenancies and to set out terms that are taken to apply to all agricultural tenancies and to provide a mechanism for resolution of disputes between parties to agricultural tenancies either by mediation or arbitration: Agricultural Tenancies Act s 3. The relevant provisions of the Agricultural Tenancies Act, s 5, 21 and 22 are set out below.

“5 . Agreements to be in writing
(1) An owner and a tenant each have the right to have the provisions of any agreement creating the tenancy reduced to writing signed by the other party.
(2) If the owner and the tenant cannot agree on the terms of an agreement that is to be reduced to writing, the terms of the agreement may be determined by arbitration.
…
21 Applications for arbitration
(1) An application for arbitration of a dispute or matter may be made if it is:
(a) a dispute relating to a right or obligation conferred by this Act, or
(b) a dispute arising from, or relating to, an agreement creating a tenancy or any other dispute (not being a dispute referred to in paragraph (a)) arising from, or relating to, a tenancy, or
(c) any other matter that is permitted by this Act to be determined by arbitration.
(2) Despite subsection (1), the following disputes and matters may not be the subject of an application for arbitration:
(a) any dispute where an owner seeks ejectment of a tenant or recovery of rent,
(b) any dispute, or any other matter, of a kind prescribed by the regulations.

22. Jurisdiction of courts
(1) A court has no jurisdiction:
(a)in respect of any issue in a dispute or matter relating to a right or obligation conferred by this Act or any other matter referred to in section 21 (1) (c), or
(b) in respect of any issue in a dispute or matter that has been referred to arbitration and has not been withdrawn or dismissed for want of jurisdiction.
(2) If proceedings for the determination of any issue were commenced in a court before a dispute or matter involving that issue was first referred to arbitration, the arbitration proceedings are to be terminated on the application of a party to the arbitration who is a party to the court proceedings.
(3) Subsection (2) does not apply to arbitration proceedings relating to an issue in respect of which a court has no jurisdiction.”

82 The defendants concede in their submissions that there is in fact some written record of the agreement between the parties through the memorandum of association. But the defendants say that although the memorandum demonstrates certain rights of the defendants it does not satisfy the Agricultural Tenancies Act as is evidenced by the current dispute, which shows that there is disagreement about the respective entitlements of the parties pursuant to that agreement. The defendants say the parties are really in dispute about whether the provisions of the lease to be granted by the company govern the occupation of common land.

83 The defendant's argument fails in my view for the reasons explained by the company in submissions. Agricultural Tenancies Act s 22(1)(a) deprives the Court of jurisdiction "in respect of any issue in dispute or matter relating to a right or obligation conferred by this Act". Agricultural Tenancies Act s 5 is said to be the right conferred under the Act, which is in dispute. But the Agricultural Tenancies Act s 5 right is one that is not the subject of dispute between the parties. There is a written agreement between the parties, which has resulted in the company licensing designated areas and common property to the defendants as earlier explained in his reasons. There is still a lease to be issued. But this Court is being asked to determine a dispute anterior to the determination of the terms of that lease. This Court has been asked to determine and construe an existing written agreement in the form of Currawinya’s constitution. It has now done so. That in my view is not an issue about having the provisions of an agreement creating an agricultural tenancy reduced to writing. It is a dispute about the meaning of an existing agreement.

84 In the light of these reasons the company after making appropriate rules and regulations under clause 2 (a)(iii) is in my view entitled to offer the defendants a lease that does not contain any right for the defendants to undertake grazing or agricultural activities on common property. The real issue raised by the defendants is that they want to undertake such activities on common property. Whether they can or cannot undertake such activities does not depend upon the form of a future lease that the company might offer the defendants. Rather it depends upon whether the company has validly passed rules and regulations under memorandum clause 2(a)(iii) prohibiting the conduct of grazing activities on common property. That is not a dispute about the terms of the lease but is a dispute about the capacity of company to pass valid resolutions in accordance with its constitution. In my view the Agricultural Tenancies Act does not apply here.

(4) Agricultural Tenancies Act s 21 and the claim for less than $60,000

85 This issue is resolved by my determination of issue (3). The Agricultural Tenancies Act does not apply to the present dispute, which is related to the construction of Currawinya's constitution.

86 The defendants argue that by Agricultural Tenancies Act s 22(2) that the Court has no jurisdiction in respect of matters referred to in Agricultural Tenancies Act s 21(1)(c), a provision which refers to other matters which are permitted by the Act to be determined by arbitration. The defendants say that the company last particularised its money claim against the defendants at $48,000. The defendants submit that if this claim can be referred to arbitration then the court has no jurisdiction. The defendants say that a dispute "prescribed by the regulations" may not be the subject of an application for arbitration: Agricultural Tenancies Act s 21(2)(b). The defendants then point to Regulation 4 of the Agricultural Tenancies Regulation which provides that a matter exceeding the Local Court’s jurisdiction cannot be the subject of an application for arbitration, as follows:

“Any dispute involving a claim for an amount of money that exceeds the jurisdictional limit of the Local Court sitting in its General Division is a prescribed dispute for the purposes of section 21 (2) (b) of the Act.”

87 The defendants then submit that, "this permits claims for less than $60,000 to be the subject of an application for arbitration". The defendant's logic appears to be that the money dispute here is within Local Court jurisdiction and therefore is not "prescribed" for the purposes of Agricultural Tenancies Act s 21(2)(b) and that it is "permitted by this Act to be determined by arbitration", Agricultural Tenancies Act s 21(1)(c). That in turn enlivens the ouster of jurisdiction in Agricultural Tenancies Act s 22(1)(a). Whatever the merits of this argument in relation to a claim for $48,000 its limitation is that for the reasons explained in relation to question (3) that the Court is not deprived of jurisdiction to construe Currawinya’s constitution as it has done.

(5) Validity of the decision to withdraw permission to graze – a continuing right to graze and other matters.

88 The company claims the defendants’ cattle are trespassing on common land. The defendants deny there was a trespass because their occupation was the defendant's right. I have found that to the extent that the defendants did have the liberty to graze cattle on common property that that along with other rights of occupation of common property are able to be regulated under memorandum clause 2 (a)(iii).

89 I am conscious of the fact that in relation to the construction of Currawinya’s constitution that the conclusions set out in these reasons do not correspond with the position exactly put by either party. The concept of the defendants having an exclusive licence of a designated area and a supplementary licence of common property is not one which has really been directly addressed by either party in relation to the subsequent issues for determination. I am troubled that having reached this conclusion the parties are not aware that this legal structure would be found. There is a risk in the circumstances that I might decide subsequent issues upon a basis which one or other of the parties may not have anticipated. In order to ensure complete procedural fairness the parties may need to adjust their submissions in light of these findings.

90 A matter of particular concern to me in light of these findings is whether the parties are yet adequately at issue in their submissions about the validity of the general resolution of the general meeting of 13 March 1999, apparently withdrawing permission to shareholders to graze cattle on common property. The validity of this resolution is of considerable importance as a foundation for the company's claim for trespass and related issues. It is also a defining issue in relation to the defendants cross claim. I have found that the occupation of Currawinya’s common property even under the supplementary licence held by the defendants, is to be controlled under the provisions of memorandum clause 2 (a)(iii) by ”such rules and regulations as the company may from time to time prescribe for the conduct of the land and affairs of the company". The clearer question that my reasons now throw up is as to whether the resolution of 13 March 1999 in the circumstances is indeed such a rule or regulation and if it does not so qualify whether the company propounds some other alternative event as qualifying as a rule or regulation.

91 I have decided that the safest course is for me to give judgment containing these findings and then to allow the parties only a very brief period to put on any supplementary submissions that they wish about this issue after which I will deliver judgement on the remaining questions. If that opportunity is not sought by either side, then the other issues will be determined directly.

Conclusions and Orders

92 In the result I have found that clause 2(a)(i) of Currawinya’s memorandum of association does not confer on the defendants a liberty to graze cattle on Currawinya. The company gives the defendants a license to occupy common property subject to the company’s rules and regulations in relation to the conduct of activity on that common property. The only relevant requirement upon the company for making such rules and regulations relating to common property was that they apply equally to all members.

93 I have further found that the Agricultural Tenancies Act 1990 does not apply to the dispute between the company and the defendants, which dispute is within this Court’s jurisdiction. However, in light of these findings the validity of the resolution in general meeting of 13 March 1990 needs to be the subject of further submissions to ensure procedural fairness, as I have explained above, to determine whether not it was a valid exercise of the company’s power to make rules and regulations with respect to common property. It seems to me that the combination of findings in these reasons was not entirely anticipated in the parties’ submissions.

94 I direct the parties to provide written submissions upon the issues I have identified within four weeks.

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19/01/2011 - Typographical errors - Paragraph(s) 4,11, 16, 17, 23, 25, 31, 44, 48, 52, 53, 54, 57, 59, 67, 69, 74, 76, 83