Davis v McLaren Vale & Districts War Memorial Hospital Incorporated

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
DAVIS v MCLAREN VALE & DISTRICTS WAR MEMORIAL HOSPITAL INCORPORATED
[2024] SASC 119
Judgment of the Honourable Auxiliary Justice Bochner
CORPORATIONS - MEMBERSHIP, RIGHTS AND REMEDIES - MEMBERS' REMEDIES AND INTERNAL DISPUTES - OPPRESSIVE OR UNFAIR CONDUCT
Application seeking a declaration that the resolution to transfer the Association assets is invalid and that the affairs of the Association were conducted in an oppressive manner.
Held:
1.      The conduct of and decisions made by the Board of the Association, between the period December 2022 and 25 May 2023 were invalid because the Board was not properly constituted.
2.      Otherwise, the Association did not engage in conduct that was oppressive or unreasonable during this period.
3.      Between 10 May 2023 and 4 July 2023, the Association engaged in conduct that was oppressive and unreasonable.
Associations Incorporation Act 1985 (SA), referred to.
Millar & Ors v Houghton Table Tennis and Sports Club Inc [2003] SASC 1; Pettit v SA Harness Racing Club Inc & Ors [2006] SASC 306; Ridgway v Sporting Shooters’ Association of Australia Hunting and Conservation Branch (SA) Inc [2015] SASC 7; Singh v Singh; Flora trading as Flora Constructions v Budget Demolition & Excavation Pty Ltd [2008] NSWSC 386; Ngarluma Aboriginal Corporation RNTBC v Ramirez & Anor [2018] FCA 1900; Margaretic v Western Australian Trotting Association [No 3] [2023] WASC 229, considered.

DAVIS v MCLAREN VALE & DISTRICTS WAR MEMORIAL HOSPITAL INCORPORATED
[2024] SASC 119
CIVIL

The McLaren Vale and Districts War Memorial Hospital Inc (which I will refer to as “the Association”) commenced operation in 1951, with its first patient being admitted on 7 May 1951. Since that time, it has operated as a private hospital in McLaren Vale. At the time of the incorporation of the Association, McLaren Vale was a small rural community, distant from Adelaide, with few medical services and facilities between it and the Royal Adelaide Hospital. At the time of its commencement, it offered a full suite of medical services, including obstetric care and surgery.
Over the decades, McLaren Vale’s isolation from Adelaide decreased and sophisticated medical services were introduced much closer to its growing population, including the Flinders Medical Centre and the Noarlunga Hospital. As a result, the demand for services at the hospital run by the Association decreased, as did its relevance to the community. Its facilities became outdated and it struggled to attract and retain medical and nursing staff. In particular, surgeons operating in private elected to take their business elsewhere and by the early twenty-first century, the Association was struggling to make ends meet. It became dependent on government funding, and it became very difficult to recruit board members. The membership of the Association had dwindled to fifty-seven at the time of its annual general meeting in October 2022.
In January 2023, the board determined that the hospital should close and the Association be wound up. It approached the chief executive officer of the James Brown Memorial Trust (“the JBMT”), which operated the nearby Kalyra Nursing Home, and, in effect, offered its assets to the JBMT, subject to a number of conditions. It then put to a special general meeting of the Association resolutions to allow this to occur, which would result in the ultimate winding up of the Association. In brief, that is what has led to this action, in which a member of the Association has claimed that it has acted in a way that is oppressive or unreasonable, within the meaning of s 61(15)(a)(ii) of the Associations Incorporation Act 1985 (“the Act”).
The Association
It is necessary to spend some time with the Constitution of the Association. Clause 1 provides that the name of the Association is “the McLaren Vale & District War Memorial Hospital Incorporated” and throughout, it refers to the Association as “the Hospital”. Thus, it is necessary, immediately, to distinguish between the business operated by the Association, a hospital, and the Association’s method of referring to itself in its Constitution as “the Hospital”. When it refers to the business operation of the Association, the Constitution refers to it as the “MVDWMH”.
The objects of the Association are set out clause 4:
4.     Objects
a) To remain incorporated as an association pursuant to the Act. To avoid confusion, this means that the Hospital is to remain membership based with any proceeds of the Hospital being used to further its objectives.
b)    To provide the community with a viable and sustainable health care service.
c)    To develop and maintain a program for the maintenance and development of the MVDWMH and its environs.
d)    To effectively and efficiently administer all facets of the health care service.
e)    To provide an effective system of communication with regard to Hospital activities and facilities.
A number of features of these objects immediately invites comment. First, the Association is not required, by its Constitution, to operate a hospital. It is to provide the community with a viable and sustainable health care service. Second, it is to remain a member-based association incorporated under the Act.
The powers of the Association are described in clause 5 of its Constitution. Relevantly, clause 5 provides:
5.     Powers of the Hospital
In addition to the powers conferred by section 25 of the Act, the Hospital shall have the following powers:
…
b)    To sell, exchange, lease, mortgage, hire, dispose of, turn to account or otherwise deal with all or any part of the real and personal property of the Hospital. This power is subject to the requirement that the intention of the Hospital to sell, exchange, lease, mortgage, hire or dispose of assets of anticipated value exceeding $250,000 or any real estate disposal, but excluding Hospital equipment, shall be notified by public advertisement in a local newspaper with sufficient time for a special meeting of Members to be called if deemed necessary by Members under the terms of Rule 10.3.
…
d)    To take over or enter into and conclude any agreements and make or do any deed, act matter or thing in furtherance of the objects of the Hospital.
…
l)     To apply the income and property of the Hospital towards the promotion of the objects of the Hospital.
Thus, it can be seen that, to sell real property of any value and other assets worth more than $250,000, the membership of the Association must be given notice of this intention with sufficient time to allow the calling of a special general meeting if required by a member. It is also clear that the income and property of the Association can only be “applied” for a purpose that promotes its objects.
Clause 6 deals with membership. The following parts of clause 6 are relevant to this action.
Clause 6:
6.1     Eligibility
Any person aged 18 years or over, who support the objects of the Hospital is eligible for membership of the Hospital.
6.2     Application for Membership
To become a Member of the Hospital, a person must:
a)   Complete that prescribed application for membership form (at Schedule1); and
b)   Pay the Annual Fee.
c)   On commencement of membership, Members agree to be bound by these rules.
6.3     Member Entitlements
Upon the expiration of four weeks from the date of commencement of membership, Members are entitled to:
a)   Nominate for election to the Board;
b)   Nominate other Members for election to the Board; and
c)   Vote at General Meetings.
These provisions make it clear that, as long as an applicant for membership is over that age of 18 and supports the objects of the Association, they are eligible for membership. If they have fulfilled the requirements of clause 6.2, they will become a member, without the need for consideration or acceptance by the Association or its Board. In effect, membership is automatic, if clauses 6.1 and 6.2 are satisfied. The only restriction on membership (of relevance to this action) is a qualifying period of four weeks before the member can vote at General Meetings.
Clause 8 of the Constitution provides that the Board “shall be comprised of eight (8) Board Members”. Clause 8.4 allows casual board vacancies to be filled in the following manner:
8.4 Casual Vacancies
The Board shall have the power to appoint a Member to fill any casual vacancy occurring on the Board. The appointed Member will hold office, subject to these Rules, for the remainder of the Term of the vacancy being filled. The appointed Members shall be eligible for re-election at the completion of the Term.
Clause 8.5 provides that a quorum is half plus one of the Board Members.
Clause 10.3 provides for special general meetings of members. It says:
10.3   Special General Meetings
a)    The Board may call a Special General Meeting of the Members at any time.
b)    A Special General Meeting shall be called by resolution of the Board; or
c)    On delivery to the Chief Executive Officer of a request in writing and signed by twenty (20) or more Members. The purpose for holding the Special General Meeting must be specifically stated in the written request and that business only will be discussed at the meeting.
d)      The Special General Meeting shall be publicly advertised in the same manner as the Annual General Meeting.
e)    The Chief Executive Officer shall convene the Special General Meeting within sixty (60) days of receipt of the written request for such meeting.
f)     Members eligible to vote shall have power to deal with any business the subject of which notice has been given.
g)    An eligible Member may vote by proxy at a Special General Meeting in the same manner as for an Annual General Meeting.
h)    The quorum for a Special General Meeting shall be one-third (1/3) of Members as recorded on the register of members or twenty (20) Members eligible to vote, whichever is the lesser.
i)     If a quorum is not achieved at the expiration of 20 minutes from the time specified for commencement of the meeting, the meeting will lapse.
j)     Retention of minutes shall be the same as for the Annual General Meeting.
Clause 10.2(f) provides for the manner in which notice is to be given of an annual general meeting (and therefore of a special general meeting). It provides:
At least twenty eight (28) days public notice shall be given of the Annual General Meeting by the posting of written notices in public and prominent positions in the Hospital district. In addition one (1) public notice shall appear in the Southern Times Messenger or its equivalent for the Hospital district at least twenty eight (28) days prior to the Annual General Meeting.
Winding up of the Association is dealt with in clauses 16 and 17. They provide:
16.     Winding up
The Hospital may be wound up in the manner provided for in the Act.
17.     Application of Surplus Assets
a) If after the winding up of the Hospital there remains ‘surplus assets’ as defined in the Act, such surplus assets shall be distributed to any organisation which has similar objects and has rules which prohibit the distribution of its assets and income to its members.
b)    Such organisations shall be identified and determined by a Special Resolution of Members in General Meeting.
It is useful to note, at this point, the way in which the Act deals with the winding up of an association. Section 41 of the Act relevantly provides:
41—Winding up of incorporated associations
(1)Subject to the succeeding provisions of this Part, an incorporated association may be wound up—
(a)     by the Supreme Court; or
(b)     voluntarily; or
(c)     on the certificate of the Commission issued with the consent of the Minister.
As long as an association is not being wound up because it is unable to pay its debts, it can be wound up voluntarily by its members, on the passing of a special resolution, for any reason.
The assets of the Association
The Association’s real property, on which the current hospital stands, was given to it in 1947. The gift included five acres of land and a house built in 1862 which is called “Tsong Gyiaou”. The construction of the current hospital building commenced in April 1950 and, as I previously mentioned, it opened for business in late April 1951. It later built a retirement village, however this venture was not successful as the Association did not have sufficient cash reserves to allow it to meet its obligations in a timely manner when a resident’s unit was vacated. In 2018, the Association negotiated the sale of the retirement village to the JBMT; the sale was approved by a special general meeting of members held on 26 September 2018.
Another parcel of land had been leased for a number of years to the South Australian Housing Trust, on terms unfavourable to the Association. This land was recently (but before the events in question in this action) sold to the state government.
The land retained by the Association is currently valued at approximately $6,000,000.
The Association has leased some of its facilities to tenants. The Wellbeing McLaren Vale GP Clinic (“Wellbeing”) first leased space within the Association’s premises in 2007. A further lease was entered into on 1 November 2022, for a period of five years, with a right to renew for a further five years after that. Wellbeing pays a commercial rent for this lease. I understand that this lease is registered.
Clinpath also had a lease with the Association. I understand that at some point in the last year or so the space leased by Clinpath has been incorporated into the area leased by Wellbeing, and Clinpath has become a sub-lessee of Wellbeing.
On 5 May 2008, the South Australian Ambulance Service (“SAAS”) leased part of the Association’s premises and established an ambulance station. The lease is for a period of fifty years, and SAAS pays a peppercorn rent. I understand that this lease is also registered.
A group of volunteers has established an op shop in part of the Association’s premises. The op shop generated substantial income each year, and that income, along with moneys from other fundraising events held by the volunteers, substantially increased the annual income of the Association. It seems that the op shop is a profitable business much valued and strongly supported by the local community. In 2023, the volunteers obtained planning approval to build two large sheds on land owned by the Association to allow them to expand their efforts.
At some point (although it is not clear when exactly), the Association entered into two commercial agreements, with the JBMT and with Meals on Wheels. Pursuant to the agreement with the JBMT, the Association provided all of the meals offered by the JBMT in its aged care facility. While this was meant to be at commercial rates, poor management by the Association led to its pricing the meals at below cost price; as a result, the Association did not obtain the value out of this contract that it should have and in fact suffered a loss of more than $100,000 per year. This situation was remedied in about 2021, when a new manager was employed who changed the price structure of the meals to allow the Association to meet the costs incurred from this contract, rather than the substantial loss that it had been making. I understand that a similar problem was found to exist with the contract to supply meals to Meals on Wheels; this was also rectified in around 2022.
A physiotherapist leases rooms in Tsong Gyiaou, and a community radio station also operates from there, although the evidence did not make it clear whether the radio station leased space or was permitted to use space in Tsong Gyiaou on some other basis.
At the time of the trial, the Association had sold off its plant and equipment. Thus, its only remaining assets are the land and infrastructure and the leases. Since the closure of the hospital, it has entered into a lease with the JBMT and Meals on Wheels to allow them to use the kitchen for their meal supply.
External advice sought by the Association
The Association has, on at least two occasions, sought advice from external consultants about the ongoing management and financial viability of the hospital.
Asia Australis delivered a report to the Association in March 2020. According to the report, Asia Australis was engaged:
… to review the current situation of the Hospital including
·The necessity to achieve and maintain financial viability over the long term.
·The current state of the hospital’s buildings, equipment and facilities.
·The needs, expectations and aspirations of key stakeholders including the Board, the staff, the Members, the Minister and his Department (represented by the Southern Adelaide Local Health Network (“SALHN”)) and the wider local community.
·The current and foreseeable demographic, socio-economic and health industry specific trends that may impact upon the hospital in the future.
·Any other factors that appear to be relevant.[1]
[1] A1, document 11.
In undertaking the review, Asia Australis consulted:
·Board members;
·Hospital management and staff;
·SALHN including its Division of Rehabilitation, Aged and Palliative Care;
·Southern Palliative Care;
·Wellbeing;
·The SAAS;
·Straight Back Physiotherapy; and
·Referring general practitioners.
It does not appear that there was consultation with members of the Association or the broader community.
Asia Australis identified the following options available to the Association:
·Continue with its existing arrangements including its current level of government funding;
·Continue with its existing arrangements absent any government funding;
·Increase the number of public beds available;
·Continue as a private hospital, on the basis of 90% occupancy;
·Move to a fully public hospital;
·Close the hospital and open a regional medical centre, offering general practitioners, allied health and other health related services on the site;
·Move to a palliative care provider, including in-patient palliative care; and
·Sell the site.
Financial modelling was carried out for all but the last three options. It found that none of these was financially viable. It also found that there was insufficient demand for a local palliative care centre. It recommended that the Board consider the regional medical centre option and carry out the due diligence necessary to allow an informed decision to be made in this regard. Mr Overland’s evidence was that the report was received and discussed by the Board. He said that the Board accepted what the authors were saying “but there was a great reluctance on the part of the board at that time to simply give up and close the hospital”.[2]
[2] T331.19-23.
Sometime later, the Board commissioned Destravis Group to undertake “a detailed clinical services planning study for the hospital which would help the Board and staff understand the opportunities that may exist over the next 5 to 10 years for the future development of the hospital.”[3] Destravis delivered its report in May 2021.
[3] A1, document 20.
Destravis, like Asia Australis, consulted with those whom it regarded as key stakeholders. They were:
·Board members;
·Employees of the Association employed in senior roles at the hospital;
·Representatives of SALHN;
·An orthopaedic surgeon; and
·A physiotherapist.
Again, it appears that there was no consultation with members of the Association or with the wider community.

Destravis identified four “focus areas” and listed actions to be taken to build on these areas. Each “focus area” was based on the Association continuing to run a hospital offering low acuity inpatient care, including convalescent care, care awaiting nursing home placement, palliative care and some types of post-operative care.
As to the Destravis report, Mr Overland said:
A.Yes it was received by the board and discussed by the board. Destravis did a very comprehensive analysis, statistical analysis and it in many ways tended to reenforce what Asia Australia has actually said. So we focused on the idea of encouraging SALHN to engage with us to do some of the things that the Destravis report had talked about.[4]
[4] T334.7-13.
This action
The applicant, Mr Davis, seeks to have set aside a resolution of members on 4 July 2023 to give the Association’s assets to the JBMT for no consideration. He wants the Association to undertake a proper consultation process about what to do with its property, with members and the broader community. He says that the Board of the Association made a unilateral decision to close the hospital, to give its assets to the JBMT and to wind up the Association, without giving any real consideration to the available alternatives. Further, not only did it ignore requests for consultation, it treated as enemies those seeking consultation and investigation of alternative uses for the site.
Mr Davis makes the following complaints about the actions of the Board:
·That at the time that the Board made the decision to close the hospital and give the Association’s assets to the JBMT, it consisted of only seven members and so was not properly constituted. As a result, its decisions are void.
·The Board reached an agreement with the JBMT before seeking the authorisation of members to close the hospital and dispose of its assets.
·The Board failed to give any real consideration to alternatives to the giving of the Association’s assets to the JBMT.
·The Board colluded with Wellbeing to boost membership numbers so as to ensure their preferred outcome was achieved.
·The Board would not engage in any dispute resolution processes as required by the Constitution.
·The organisation to which the Board seeks to give the Association’s assets is not a like organisation for the purpose of clause 17(a) of the Constitution, and so it cannot receive them. The JBMT is not a member-based association; rather, it is incorporated by statute, and it is constituted by its trustees. It has no general membership. Further, it is limited in the objects of its assistance. It can only assist those who are aged, infirm, lack sufficient means or are otherwise in need of charitable assistance. In effect, it is limited to operating in an aged care setting, unlike the Association, which has much broader objects, in effect, to provide a health care service for the community.
·The Board misled the community by referring to the proposed transaction as a merger between the Association and the JBMT. In fact, the plan was simply to give the JBMT the Association’s assets and then wind up the Association. The Association would no longer exist in any form whatsoever.
·The Board engaged in a campaign of misinformation, by alleging that those who opposed the JBMT proposal wanted to enter into an arrangement with a private property developer which would put at risk all of the services currently operating from the site.
Mr Davis also calls into question the validity of the members who joined the Association at the instigation of the Board and Wellbeing in the period between 6 May 2023 and 4 July 2023. This is on the basis that they joined the Association in order to vote in favour of a resolution that would lead inevitably to its winding up; if this is the case, then they have not fulfilled one of the eligibility requirements, that they support the objects of the Association.
Mr Davis seeks a declaration that the resolution to transfer the Association assets is invalid. He also seeks a declaration that the affairs of the Association were conducted in an oppressive manner. He seeks a direction that the Board appoint a committee, which is to include himself and Mr Baragwanath and two nominees of the Board, to investigate the alternatives available for the assets of the Association to be used to achieve its objects. He seeks this relief pursuant to s 61 of the Act, on the basis that the conduct complained of was oppressive.
The witnesses
Mr Davis called three witnesses, himself, Mr Baragwanath and Mr Bignell. Mr Baragwanath is a long term resident of McLaren Flat. He is the managing director of an ASX listed company and has experience in managing investments for charitable organisations. He has worked extensively with a number of not-for-profit organisations. I consider that Mr Baragwanath was a reliable witness, who gave his evidence in a clear and honest manner. I formed the view that he sought to assist the Board and the community and that he was not motivated by any self interest in his dealings with the Association and the Board. He gave his evidence in a reasonable and measured way and I have no difficulty in accepting his evidence.
Mr Davis is a lawyer and is currently running for preselection as the Liberal candidate in the federal seat of Mayo, of which McLaren Vale is a part. He is a long standing business associate of Mr Baragwanath, who first drew his attention to the plight of the Association. Mr Davis was also a clear witness who gave his evidence in a straightforward manner. I consider that he was a witness of truth, who did not appear to be driven by his own interests. At times he appeared somewhat disengaged from this action and the affairs of the Association; I do not, however, consider that this is a reason to distrust his evidence.
Mr Bignell is the local state member of parliament for Mawson, in which McLaren Vale and the surrounding region fall. He gave his evidence in a straightforward manner and I have no difficulty accepting him as a witness of truth.
The Association called four witnesses, Mr Overland, Ms Blunt, Dr Lawlor‑Smith and Dr Lovell. I consider that Mr Overland was an experienced and conscientious Board member, with a long career in hospital and health administration. He has been a member of the Board of the Association since early 2019. He gave the impression of one who had given all he had to give; the effort of keeping the Association afloat had worn him down. At times he became quite heated and emotional in his evidence about the work undertaken by himself and other Board members for the benefit of the Association. At the same time, he appeared dismissive of others’ views; he seemed to take the view that there was no point seeking others’ views on how to manage the Association because no one else knew anything about it. At times, I found his evidence to be somewhat disingenuous as he tried to distance himself from the actions of Dr Lawlor-Smith. At other times, he was defensive of his actions and the decisions of the Board. He also tended to preface many of his answers with words such as “I would have…” and so it was unclear to me whether he had an independent recollection of the matters that he was giving evidence about, or whether his evidence was a reconstruction of what he thought would have been the case. Nonetheless, I consider that he was a conscientious witness who did his best to assist the Court. Generally, I accept his evidence, with that caveat.
I accept that Ms Blunt, Dr Lawlor-Smith and Dr Lovell were also witnesses of truth, who did their best to assist the Court.
I note that Mr Dal Cin, who appeared for Mr Davis, and Mr White KC, who appeared, with Mr Wicks, for the Association both urged me to make findings unfavourable to the witnesses of the other side. I am unable to do this. As I have said, I generally found all of the witnesses to be truthful. While Mr Baragwanath and Mr Davis clearly have political interests, I do not consider that they sought to pursue those interests through the vehicle of the Association or this action. Similarly, I accept that the fears and concerns expressed by Dr Lawlor-Smith were genuinely held by her and that she was not motivated by any financial concerns or other self interest.
It is worth noting that there were, in fact, very few factual issues in dispute between the parties. What was in dispute was the characterisation of the actions of the various individuals and the Board.
I should also say at this point that I do not intend this judgment to be a criticism of the actions of the Board members. I accept that, at all times, they acted in good faith and in what they considered to be in the best interests of the Association and its members. I accept that, with the benefit of a combination of hindsight, and the fact that I was not enmeshed in the day to day running of the Association, it is perhaps easy to criticise actions of well-meaning volunteers who are doing their best to promote the best interests of the Association and its members.
The events leading to the decision to close the hospital
On 9 June 2022, Mr Chris Overland, the chair of the Association’s Board, provided what he called a “Retrospective Review” to the Board.[5] As part of the section of that report headed, “Background”, Mr Overland said the following:
For the last 4 years the Board has been engaged in a more or less constant process of crisis management as it has dealt with a series of problems arising from a combination of factors including previous imprudent or misguided decisions (or non decisions) and what appears to have been managerial incompetence, as well as new problems such as the ongoing pandemic.
[5] A1, document 33.
He then outlined the problems and how they had been dealt with, including the problems with the catering contract and the sale of land to the JBMT and the South Australian Government.
Mr Overland outlined the Association’s clinical challenges. He described the Association’s difficulty in attracting the services of a sufficient number of general practitioners to ensure its viability. He also addressed the Association’s relationship with the SALHN, in whose purview the Association falls. He described an improved relationship with the SALHN but noted that at that time, the financial arrangement between the Association and SALHN did not extend beyond the end of 2022.
Mr Overland concluded his report in the following way:
As will be apparent from the foregoing discussion, the Board has had to devote a great deal of time and energy to taking the hospital from technical insolvency to its current relatively buoyant position. Given the many problems that have had to be overcome this is a very significant achievement.
It will also be apparent that significant vulnerabilities remain that may impact upon the hospital’s capacity to remain a viable service provider for the wider public hospital system.
In my judgment the Board has exhausted its potential to do much more to ensure that the hospital can continue to provide acute and sub acute patient services in a cost effective manner. Its fate is now largely in the hands of its principal funder and the SA government.
Mr Overland again addressed the financial situation of the Association in his report to the annual general meeting on 26 October 2022.[6] He said that the hospital reported a profit for the financial year ending 30 June 2022. He reported that the current funding arrangement with SALHN expired on 31 January 2023 but that the Board was “hopeful” that a new contract of the same or longer duration would be negotiated. About the long term viability of the hospital, Mr Overland said the following:
Turning to the future, the Board’s immediate priority is to secure a long term funding agreement with SALHN. Once such an agreement is in place the Board can consider the hospital’s future role in the community.
A critical factor in any decision about the longer term future will be the extent to which SALHN will actually require access to the facility. It is in the process of planning for the construction of an additional 200 bed capacity on the Flinders Medical Centre site. These beds seem likely to come on stream, perhaps in stages, over the next 3 to 5 years.
Realistically, once these beds are available it would make little sense for SALHN to continue to fund beds at McLaren Vale. As I mentioned in my report last year, the hospital is now over 70 years old and no longer meets contemporary expectations about how a hospital is designed and configured. Redevelopment is not a realistic option both from a cost and architectural standpoint.
This hospital is, in truth, now too old, too small and in the wrong place to meet the future needs of even the immediate local population.
As a consequence, the Board will have to consider what the best use of the facility would be were it not operating as a hospital.
One plausible option for the future would be to convert the hospital into a health hub which offers a range of both public and private health and related services to the wider southern vales community. The Board would welcome suggestions from the community about what could or should be done.
[6] A1, document 35.
It seems from this that, in October 2022, the Board was considering the regional medical centre option recommended by Asia Australis as a possible alternative use for the assets of the Association.
At the annual general meeting on 26 October 2022, present, apart from Board members, were ten members and four non-members. The minutes of the meeting record the following was said by Mr Overland:
So, I think that means as a community we need to start turning our minds to what we’re going to do with this really good facility once its time as an acute hospital ends. We have the luxury of a certain amount of time, I think and we need to use that time to think about the future.
I feel I have to say this publicly now, so people can go away from here and understand that this hospital cannot operate as an acute care facility on an indefinite basis. However, it can be something else. It can be a focus for community health services or private health services, it can be turned into consulting rooms, or, in a worst case scenario, it can be bought for housing.[7]
[7] A1, document 38.
It is interesting to note that Mr Overland appeared to stress the notion of community engagement in any planning process for the future. How this was going to be achieved is not explained, given that only ten members (in addition to board members) attended the annual general meeting. No evidence has been adduced that broader community consultation was sought, or that there was any attempt to advise the community (outside of the ten members who attended the meeting) of the situation that the Association was in with regard to the viability of the hospital.
I further note that, neither in his written report, nor in the oral statement that he made at the annual general meeting, did Mr Overland refer to the difficulty with recruiting and retaining general practitioners to work at the hospital, or the concern about the upcoming retirement of one of the hospital’s long standing general practitioners.
On 22 November 2022, Mr Overland wrote to the Honourable Leon Bignell MP, the local member of parliament for McLaren Vale and the surrounding areas. In this letter,[8] he told Mr Bignell that the hospital was operating at a loss and expected a deficit of between $100,000 and $200,000. He outlined the Association’s hopes with regard to ongoing government funding and support from SALHN. He then outlined the difficulty that the Association had in attracting and retaining general practitioners to provide ongoing care of both public and private patients admitted to the hospital. He discussed the future of the hospital as an acute care facility in the following terms:
As you are aware I have for some time been publicly flagging that the hospital is approaching the end of its working life as an acute care facility.
I have made this point quite directly and openly at the last two Annual General Meetings. There has only been a muted reaction to my comments. Most people appear to understand that the hospital is now too old, too small and in the wrong location to have an indefinite role providing acute and sub-acute care.
I have pointed out that redevelopment of the hospital to meet modern standards and expectations would, in any event, be prohibitively expensive and that new hospital facilities would logically be constructed in the areas of major population growth in the southern region.
The Board understands this situation and has already begun turning its mind to what might be done with the facilities in the future. The most logical use would be as a ‘health hub’ where various types of health and health related services were delivered by both private and public providers.
That said, the hospital remains capable of providing acute and sub-acute services over the medium term of 3 to 5 years.
[8] A1, document 40.
This letter is consistent with the message that Mr Overland sought to convey at the annual general meeting a month earlier. The clear message was that, while the hospital’s life was limited, it was viable for three to five years, during which period the Board would consider to what use the Association’s assets would be put once the hospital ceased to operate. The alternative consistently put by Mr Overland is use of the assets as a “health hub”.
Two days after this letter was written, the Board of the Association met. The minutes of the 24 November 2022 meeting record that, in relation to the Association’s finances, while there had been a loss for the month of October 2022, “the hospital appears to be travelling well.”[9]
[9] A1, document 41.
On 7 December 2022, Mr Overland sent an email to Board members, in which he reported on a recent meeting with SALHN representatives to discuss the funding arrangement for the Association.[10] He reported that SALHN was likely to offer funding for a period three years, and was willing to consider an increase to the amount. He then said this in relation to the hospital’s medical workforce:
There is a clear recognition of our vulnerability in relation to medical services. They understood the pressure operating upon GPs generally and the many disincentives associated with delivering care in a hospital setting. Craig [Whitehead, Director, Rehabilitation and Palliative Care at SALHN] in particular is very concerned about what will happen when Graham Lovell retires in mid 2023. The prospects of replacing him look slim and he currently is the GP looking after the most public patients. I made it clear that in the absence of a viable panel of GPs we could not continue to operate as a hospital and that the Board would have to look at closure in that situation.
[10] A1, document 42.
Mr Overland reported that he told the meeting that Board members were devoting more time than would normally be expected to oversee the management of the hospital. He said that this could not continue indefinitely and that finding people to take on Board positions was “no easy task”.
Mr Overland further noted that the timing of the closure of the hospital was discussed, on the basis that the government would “not countenance such a decision in the run up to an election.” Overall, the tone of the email was buoyant and optimistic.
This is the first mention of Dr Graham Lovell, one of the doctors at Wellbeing, and his retirement in mid-2023. While the difficulty of attracting and retaining doctors had been raised on numerous occasions in the past, Mr Overland had not previously linked the ability of the hospital to provide services to one doctor in particular, nor had he suggested that the retirement of one individual would lead to the closure of the entire hospital. In his oral evidence, Mr Overland said the following about Dr Lovell’s retirement:
A.… The message we were getting was that Graham was contemplating retirement. And Graham was a person we were quite heavily reliant on then to take public patients, particularly palliative care patients. So, we thought that - the advice we were receiving was that he was looking towards retirement. Graham is affected by Parkinson's disease, and we thought that was probably influencing his thinking.[11]
[11] T344.1-8.

In cross-examination, Mr Overland said the following about Dr Lovell:
Q.So what you're reporting in this email is that you said to the area network people that 'Dr Lovell or a GP in Dr Lovell's role is mission critical for us'.
A.    Yes, the GPs collectively were mission critical.
Q.    Yes, but also 'If we lose one we are in trouble and we'll have to look at closing'.
A.Yes, the reason for that is that the doctors were uncomfortable with taking more than two or three patients each. So that did heighten our vulnerability.
Q.    Yes, but you explained that to Dr Whitehead and Mr Gadd.
A.    Yes, they knew it, they understood anyway, yes.
Q.That 'If the eventuality happens that Dr Lovell retires and we don't replace him, we can't continue to operate' was your view.
A.Yes, my view was we wouldn't be able to continue to operate because we wouldn't be able to replace him. The other GPs wouldn't just simply pick up the load.[12]
[12] T452.18-35.
As to the timing of any closure of the hospital, Mr Overland gave the following evidence:
Q.You weren't talking in general terms, were you, because you've made a note that you discussed that the government would not countenance such a decision, which I suggest is a closure decision, in a run-up to an election.
A.    That was our thinking, basically, and I think that was based on experience, yes.
Q.And so the effect of a discussion is: the government's not going to countenance a closure at the end of the three-year period.
A.    We would have thought not, in our experience, collectively.
Q.And it's for that reason that the timing of a decision to close would be important. Do you see your sentence -
A.    Well, yes, I understand -
Q.    - I'm focusing your sentence.
A.- where you're driving with this. But the timing of our decision, you also see in there I say at various times we've said we were hostage to fortune, which we were. So the timing was not necessarily going to be ours.[13]
[13] T457.1-22.
He went on to say that there was no other discussion about the timing of any closure; the conversation did not extend beyond a general agreement about the reluctance of a government to accept the closure of a hospital in the lead up to an election.
Mr Overland wrote to Board members on 17 January 2023.[14] He reported that the hospital’s finances were on “a stable if not necessarily strong footing”, on the basis of the Association’s available capital fund and the current funding arrangement with SALHN. He noted that the Association was overly reliant on Board members for executive level support and that this was taking its toll on the Board members concerned. After discussing other matters, he said:
Fifth, the situation with respect the (sic) doctors remains highly problematic. The hospital is dangerously exposed should one or more decide to cease providing services. At present Dr Lovell is taking the lion’s share of patients. Upon his retirement it seems highly likely that there will be no replacement. If that is the case, then the hospital will be unable to fulfill its contractual obligations to SALHN.
[14] A1, document 43.
As with the email of 7 December 2022, the retirement of Dr Lovell is given prominence as a risk factor for the hospital. In his cross-examination, Mr Overland said that he had not received any further information about Dr Lovell’s retirement:
…we still had a belief that Graham would proceed to retirement at sometime that year, but we didn't have any confirmation to that effect…[15]
[15] T466.26-29.
He confirmed that, if the hospital was not able to fulfil its obligations to SALHN, it would need to close.[16]
[16] T467.23-25.
The Board next met on 25 January 2023, eight days after Mr Overland wrote his letter. The minutes[17] note that a profit of $41,301 was reported for the month of December 2022, but that the hospital continued to underperform against its occupied bed days budget.
[17] A1, document 44.
The minutes then record that Mr Overland advised the Board that SALHN had agreed to extend the Association’s funding agreement for six months, rather than the anticipated three years. In the context of that advice, the minutes then record:
Chris O. indicated that MVH struggles to retain core nursing staff and is critically reliant upon less than a handful of GP’s, the most active of whom will retire in June.
Mr Overland is also reported to have said that the Association was too reliant upon its Board members for management functions, and that finding replacement Board members was a problem.
The minutes go on to record:
There was a clear consensus amongst Board members that the hospital’s situation has been rendered untenable due to the apparently insurmountable problems surrounding ongoing finance, senior executive leadership and the constant struggle to recruit and retain nurses and doctors to provide patient care. It was agreed that the Chair would draft a letter to the Minister outlining the problems now being confronted and proposing that there be a managed closure of the hospital…Having regard to the community and political sensitivities surrounding this decision, the letter would be couched in terms suitable for inclusion in Hansard.
As to the use of the Association’s assets in the future, it was agreed that the Board would need to seek legal advice.
Mr Overland said that the Board felt that it could no longer carry on under the current funding arrangements. He said:
... But, we felt that an offer of five months or six months further renewal of the contract reflected a complete lack of commitment by SALHN to the hospital, even in the medium term. And there was no appetite to continue battling on when the outcome was going to be inevitable.[18]
[18] T346.38-347.5.
About Dr Lovell’s retirement, Mr Overland said:
Q.    Is it the case that you'd actually learnt definitely that Dr Lovell was retiring in June.
A.    No, I had not learned definitively, but that was what was being reported to me.
Q.You see, one inference is that - and the reason for the change in your assessment, of the optimism of your assessment between December and January is that between 7 December and mid-January you learnt conclusively that Dr Lovell was going to retire.
A.No, I did not learn conclusively that he was going to retire at any point. As I said to you, I had been told that that was what the situation was. I'm kicking myself now for not having asked him, but the reality was at no time did Graham or anyone else come along to me and say Graham is going to retire in June.[19]
[19] T476.38-477.14.
As can be seen, in the space of only two months, the attitude of the Board and Mr Overland in particular has gone from cautiously optimistic and foreshadowing a life of approximately three to five years for the hospital, to one where the immediate closure of the hospital was required. This is despite the “stable finances” referred to in Mr Overland’s letter of 17 January 2023.
It was not elicited in evidence when or how Mr Overland became aware of the apparent intention of Dr Lovell to retire in the middle of 2023, nor whether it was a matter that he reported to SALHN at the meeting in December 2022, or whether it was a matter about which the SALHN representatives had independent knowledge. Be that as it may, it appears that the supposed retirement of Dr Lovell was the catalyst to the change in the Board’s attitude about the longer term viability of the hospital. It is also clear that the workload for Board members was a significant factor in deciding to close the hospital.
Mr Overland said that, before the decision was made to close the hospital, the Board had considered what should happen to the Association’s assets. He said:
A.We had thought about it at various times, both formally and informally. There were a range of options, but we knew there was several things that we, I think we all collectively came to understand before we even thought about what specifically might be done. We knew that whatever the future may hold it was going to require a lot of capital to do something with the site, which we didn't have, it was going to require a very strong cashflow to sustain whatever organisation ultimately took control of the site while it was doing something with it, and it needed the management expertise to actually conduct some sort of large scale capital works project. So, we knew that whatever the future involved it was not going to be, to be blunt, as a community controlled entity, that it would have to be passed over to an organisation of some sort which had that sort of capability. It also had to be some sort of organisation whose objects were consistent or broadly consistent anyway with those of the hospital. We also wanted to make sure that whatever it was it was a registered charity, not for profit organisation, because we didn't believe that the property should be used for profit purposes. And also we were very concerned about the interest of our tenants, and also the historic and heritage values of the sites. So, all of those considerations were already in play, as it were, when we were thinking about what we might do. We did think about redeveloping the hospital, but that was a pretty easy option to discount because of the massive cost that would have been involved in doing that, and there was no plausible business case that you could put together for trying to build a new private hospital at McLaren Vale. The same applied to residential aged care, there was no plausible option for redeveloping it as residential aged care, it doesn't comply with the current Commonwealth standards for residential aged care.
Q. Pausing there, you mean the existing buildings.
A.The existing buildings, right. So, we knew redevelopment of the - the only option for the existing buildings which was sort of feasible, was this idea of a health hub, but even that would be very expensive to do, we knew that. We didn't just want to sell it, it was ... open to us to just sell the site and get as much money as possibly could, but then we were stuck with the problem of what did we do with that money, so that didn't appeal to us. There was a suggestion at one point that perhaps it could be used for a school, which seemed strange given that there are four schools within a 7 km radius of the site. What else came up, we really couldn't think of issues much beyond that, I mean if it had been a private company we would have sold the site for the maximum amount of money we could return, distribute it to the investors and everyone would have been happy, but we didn't want it - we couldn't see how we could sell it for housing or for a boutique hotel or something like that. So, we weren't - by January 2023 we didn't really have a clear idea about what the future might hold.[20]
[20] T349.18-350.38.
Mr Overland outlined in some detail in his evidence the efforts made by the Board to increase the viability of the hospital, including meeting with Mr Bignell, the local member of parliament, the health minister and executives at SALHN. I accept that he and the Board were diligent and hardworking in their efforts to shore up the future of the hospital.
Mr Overland ruled out the notion of going to the members for ideas about how to keep the hospital operating. He said:
A.How could the members who had no knowledge or experience in running hospitals - let's be frank here, they didn't know anything about it - how could they suggest to us how we could finesse or change the operations of the hospital? Because if those of us who had spent literally years managing the place, years, had had effectively exhausted all of the options available and we had not given up trying over that whole period of time. Again there is a litany of correspondence showing just how hard the board worked to try and rescue this organisation. We rescued it from insolvency. We negotiated a better deal financially for the hospital and despite all of that effort, despite all of the efforts we devoted to engaging with SALHN, we persuaded them to send us their officers so that they could have confidence in clinical services, all of that when you think of that effort that was put in by us and then suddenly bang, 'We'll give you six months funding.' Why wouldn't the board have concluded, any board acting reasonably would have concluded that that was the situation, right, and that's exactly what we did. The membership of the day, 57 members -
Q.    Not worth consulting is that right.
A.- the likelihood that they were going to come forth with a cunning plan to rescue the situation that we couldn't think of was nil.
Q.    So it was not worth asking them.
A.    We didn't even think about it.[21]
[21] T481.26-482.16.
The events from 25 January 2023 to 5 May 2023
On 30 January 2023, Mr Overland wrote to the Minister for Health, the Honourable Chris Picton MP.[22] In this letter, he provided background to the financial position of the hospital and said that the offer of six months’ funding by SALHN was not a viable outcome. He described the difficulties faced by the Association in recruiting senior management staff to the hospital, as well as the difficulty faced in recruiting medical and nursing staff. In relation to medical staff, he said:
The hospital is reliant upon less than a handful of GPs to provide services to public patients. The most active of these GPs is due to retire in June this year and attempts to find a local GP willing or able to replace him have been successful.
[22] A1, document 46.
Again, Dr Lovell’s retirement loomed large in this line of reasoning. In relation to the burden on Board members, he said:
The current Board is composed of a group of unusually knowledgeable and experienced people, most of whom are over age 70 years. Several members, including me, have indicated that they intend to retire at the conclusion of their current terms of office in October 2023. The likelihood that they can be replaced at all seems problematic, while attracting people of comparable knowledge, experience and skills seems even more improbable.
The Board has had to involve itself in the management of the hospital to a far greater degree that is either normal or desirable. In practice, several individual members are playing de facto executive roles to compensate for the absence of such skills in the management structure. It is simply untenable to rely upon unpaid Board members to fulfil these functions over the longer term and, in fact, they will soon be unable to do so.
He further said:
In essence, the Board believes that all realistic options to ensure the ongoing viability and sustainability of the hospital as a going concern have been exhausted. There is neither the will nor ability to keep battling with the above issues when it is obvious that the hospital is not fulfilling a vital or irreplaceable role within the local or wider community.
The Board also wrote to its lawyers, to obtain advice on whether it had the power to close the hospital, and the process that it needed to adopt to dispose of the Association’s assets.[23]
[23] T356.14-27.
On 7 February 2023, Mr Overland met with Sara Blunt, the chief executive officer of Kalyra, the organisation operated by the JBMT. It seems that this meeting did not arise out of the planned closure of the hospital; it had, in fact been initiated by Ms Blunt as part of the JBMT’s strategic planning process.[24] Mr Overland described the meeting in the following way in his evidence:
… In terms of the future use of the site, what happened was I got a request to meet with Sarah Blunt who's the Chief Executive of James Brown Memorial Trust Kalyra to talk about the future use of the hospital's kitchen and it was Sarah's intention at that time to tell me that James Brown Memorial Trust intended to build their own kitchen near their residential aged care facility and that consequently at some point in the not too distant future and perhaps a year or two, they would no longer be taking meals from the hospital and it was in the course of that conversation that the idea that James Brown Memorial Trust might actually takeover the whole site and put it to use for some other community purpose because that's when that idea arose.[25]
[24] T713.3-14.
[25] T357.1-15.
He reported on his meeting to the Board in an email dated 8 February 2023.[26] He said that Ms Blunt said that the JBMT would consider buying the hospital to use for affordable housing. He said that they discussed the constraints on the future use of the site, including the leases to the volunteers, Wellbeing and the SAAS, and the heritage listed Tsong Gyiaou building and Ms Blunt indicated that these were not insurmountable obstacles.
[26] A1, document 48.
Ms Blunt described their meeting in the following way:
A.... So I was in full strategic planning mode, so I was thinking a lot about what the demographic trends were and what things might look like for the future; and so I was considering that we might want to look at our own kitchen, some sort of a café, and other services that we could combine with that that would encourage the training of staff and young people in the area, and I also was interested to know what he knew about other demographic pieces. That then led to a conversation where he said, 'Well, you know, if you were able to have the access to the hospital surrounds, what would you do with it', and I said, 'Well, that could be along the lines of the things that I've just been talking about'. We could do a café, a wellbeing clinic with supporting - and drawing new GPs into the area, because we're also very interested in supporting GPs because of the cohort of clients and residents we have there. We could look at respite services, we know that day respite and palliative care respite, dementia, are all issues for the local community and generally across the nation. We also - I also talked a bit about that housing, having an alternate to the entry point to retirement living could be useful in the local area, because we know, for example, that nationally there are trends, like women over 50 who don't have the asset base to buy into retirement living, so affordable housing kind of options or lower price point options would be good. We also talked about the things that we're doing in progress there at the time. So I knew that the association that provides for the op shop was a really important part of the local community, and the residents living in our retirement living are very involved in that, and that was something that we would want to support because that gives a lot of meaning and purpose and is successful. And of course, I knew about the ambulance service, the speech pathologist in the Tsong Gyiaou building, and so on.[27]
[27] T714.22-715.20.
In his evidence, Mr Overland explained why the Board became focused on the JBMT as the recipient for the Association’s assets:
Q. Were alternative charitable or not-for-profit institutions considered.
A.Not really. Our focus eventually became, as you know, on James Brown Memorial Trust. And the reasons for that were that James Brown Memorial Trust had a longstanding relationship with us; the land upon which they built their residential aged care facility had been, essentially, gifted to them by the hospital. They were the owners of Aldersey Grove Estate, which directly abutted the hospital. We provided, and had provided for many years, meal services to them, so they were established presence in town, they were literally right next door. It is certainly the case that an organisation like ACH Group or elderly citizens' homes could, potentially at least, have been people we looked at. But, our view was that the logic of the situation we're in and the history of the place suggested that it was logical to go to James Brown Memorial Trust.[28]
[28] T353.28-354.7.

On 15 February 2023, Mr Overland wrote to the Board members and copied in Mr Wayne Gadd, the SALHN Director of Finance.[29] The purpose of the email was to advise Board members about a meeting that he had had that day with SALHN executives. He advised that the proposed date for the closure of the hospital was 30 June 2023. He also discussed staff issues and the catering contracts with the JBMT and Meals on Wheels. With respect to the Association’s assets, he said:
In the meantime, it is my intention to liaise with Sara Blunt on trying to clarify what JBT might be willing to do in terms of either buying the facility outright or, possibly, merging with the hospital, ie effectively taking over the assets of the incorporated entity. In this latter case, there would need to be undertakings given about, for example, providing the volunteers with tenure in their sheds and, perhaps, a reserved seat on the Board of JBT. This is obviously an area where we need legal advice.
[29] A1, document 51.
This is the first evidence before the Court of the Board’s being advised of a proposed closure date and of the possibility of an arrangement with JBMT other than a for value purchase of the Association’s assets.
The next Board meeting was held on 23 February 2023. The minutes record that there was extensive discussion about the “potential future” of the site, although no details of this discussion have been recorded.[30] The minutes do not record a discussion about the proposed date of the closure of the hospital.
[30] A1, document 53.
Mr Overland gave evidence that the Board discussed a range of options and, while there was interest in the JBMT proposal, they discussed other uses for the property. He said:
A.The one that - well, as I previously mentioned, we did talk about whether it was sensible to try and redevelop the site and the consensus was that that wasn't a feasible option either for a private hospital or for residential aged care. We talked about the idea, once again, that we might become landlords, in effect, and rent out premises in the building but our view was that the standing costs of running the building was such that the chances of us recovering sufficient revenue from that to make it realistically feasible looked pretty slim. We talked again about the idea of a multi-purpose service or a health hub which we all liked but that would actually be difficult and probably expensive to carry off. I think the issue of just a straight out sale came up but then we were stuck with the problem that, one, we couldn't necessarily look after our tenants and the historic and heritage aspects of the site and also what were we going to do with the money anyway, assuming we got a large sum of money because we knew that if you drove the proverbial bulldozer through the site then you could realise a multi-million dollar sale on it. So, those sorts of considerations came up.[31]
[31] T363.24-364.8. See also T583.8-17.
On 10 March 2023, Mr Overland emailed to the Board members a proposal from Ms Blunt that there be a merger of the JBMT and the Association.[32] It included a term sheet, which set out the basis for a negotiated agreement. The term sheet contained objectives of the parties, which included, as the first objective:
Dissolution and winding up of the [Association] and transfer of all surplus assets including the [Association] property to Kalyra.
[32] A1, document 56.
If this first objective was not achievable, other arrangements, such as a joint venture or lease, would be considered. Thus, in the space of only a month, Ms Blunt moved from a commercial proposal to one where the assets of the Association were to be given to the JBMT for no consideration.
The next Board meeting was held on 23 March 2023. The minutes record that there was a lengthy discussion about a communication strategy although it is not clear whether this was related to the hospital closure or the proposed merger with the JBMT as no detail is provided.[33] Mr Overland said that, by the time of this meeting, the Board had formed the view that the best option was for the assets of the Association to be transferred to the JBMT and for there to be a merger with it.[34]
[33] A1, document 57.
[34] T368.19-22.
It seems that on 24 March 2023, Mr Overland telephoned Ms Blunt. She reported on this conversation to the trustees of the JBMT in the following terms:
Chris Overland, Chair of McLaren Vale War Memorial Hospital Board, called today and informed me that last night the board resolved to close the hospital service on 1 July 2023. Further to this they resolved to dissolve the Hospital Board and hand over the remaining assets to an appropriate entity, that being the James Brown Memorial Trust. To that end they are now in the process of drafting the resolutions for a Special General Meeting of members to be held on 28 April 2023.[35]
[35] A1, document 58.
It should be noted that the minutes of the Board meeting the day before did not record any decision having been made about the closure date of the hospital, the transfer of assets to the JBMT, or the date of a special general meeting to put the matter to members.
A letter about the closure of the hospital was sent to the Association’s members on 27 March 2023.[36] The letter informed members that the hospital was no longer viable and must close and that the Board was in negotiations with the JBMT to merge the two organisations. It advised that an information session would be held at the hospital on 29 March 2023 and that a special general meeting would be held on 27 April 2023 at which they would be asked to vote in favour of resolutions to pursue a merger with the JBMT. On the same day, a media release was prepared and staff were advised of the closure of the hospital and the proposal to merge with the JBMT.
[36] A1, document 59.
Dr Lawlor-Smith first learned about the decision to close the hospital on 27 March 2023, when a letter was sent to medical practitioners in similar terms to the one sent to members. Her evidence was that the closure came as no surprise.[37]
[37] T629.3.
Mr Baragwanath first heard about the closure of the hospital from reading a post on the McLaren Vale Facebook page. On 28 March 2023, he wrote to the Board.[38] He had recently been involved with an association in a similar position as the Association, helping the members engage with the process of deciding what to do with their assets. He considered that the position of the Association was similar and believed that he had the skills to assist. In addition, he felt that he had neglected his own home, despite providing assistance to other organisations, and he wished to do something for his community. Before writing his letter, he read the Association’s Constitution and reviewed its financial statements for the last five years, which were freely available on the ACNC register. He formed the view that the Association was a profitable enterprise, although it was in a challenging position, and that there must be other options that he could assist with investigating.
[38] A1, document 63.
Mr Baragwanath had a number of concerns about the closure of the hospital and the giving of its assets to the JBMT. First, he did not consider that there had been sufficient (or indeed, any) community consultation about either of these decisions. Second, he was concerned that the Association was giving away a valuable asset for no consideration. Third, he was concerned that the JBMT, while a worthy institution, was not an appropriate recipient of the Association’s assets, because its scope of operation was narrower than the Association’s. In effect, he considered that giving the asset to the JBMT would not be consistent with clause 17(a) of the Constitution. He described this objection in the following way:
A.… It's not the point that the specific organisation remains in control or does something, it's that Kalyra is limited in what it is able to provide, right. So, it's a public benevolent institution, there's only so many things it's allowed to do; a health promotion charity can provide services to all people. So, the point to your question and the explanation is it's not about that particular organisation, it's about what that asset and land can do for the community broadly. So, the point of your question and the point of the answer is to ensure that an asset in a land-locked area remains available for use by the broadest group of people.
Q.Which is to say, your view is that Kalyra having the asset would be a, perhaps, sub-optimal use of the asset, is that right.
A. Yes, yes - restrictive.[39]
[39] T257.14-30.
He went on to say:
Q.And that the money in the hands of the respondent would be a better use of that money - or the respondent could put that money to better use than Kalyra holding the money itself.
A.'Better' is unfair because aged care is still a very important charity type, right. It's more that it would be used in line with the health promotion element. So, to give you a quick example, $6 million invested would provide $320,000 a year of income, which could be donated to pay for, you know, gaps, you know, dentistry, things like that to people in the area or outside the area. Whereas, a public benevolent institution would only be able to provide aged care services or to people that are destitute and, you know, in desperate need of, you know - in suffering circumstances.[40]
[40] T258.16-31.
In his letter to the Board, Mr Baragwanath offered his services and the resources of his company to carry out an investigation over the next month into the continued operation of the hospital at no charge to the Association. He also advised that he had worked closely with a developer, Ross Pelligra, who had redeveloped the Calvary Wakefield hospital site in Adelaide. He said that Mr Pelligra was interested in considering ways to help.
Mr Baragwanath’s evidence was that, when he initially learned of the JBMT proposal, he did not think it was a bad idea. He believed, however, that there needed to be a process to enable the community to buy into the proposal and agree to it. He was not happy with the quality of the information that had been provided with the proposal and he believed that he could “solve his own problem”.[41] He offered to undertake a review to determine what was possible, because he did not know what was possible at that time, including keeping the hospital open.[42]
[41] T79.10-12.
[42] T115.37-38.
Mr Baragwanath said that he contacted Mr Pelligra in order to demonstrate to the Board that there were options other than the JBMT proposal which could be investigated.[43] He said:
A.No. The intention was for the board to see that the best way for any motion to pass is to engage the community in public consultation. So, the community was already unsatisfied with the closure and my advice was that if you engage with the community in consultation then whatever option you actually put forward will be successful. If you try and force an outcome, it won't be.[44]
[43] T117.21-22.
[44] T118.7-14.
Mr Baragwanath’s evidence was that, at the time that he wrote this letter, he was not aware of either the Asia Australis or Destravis reviews.
Mr Baragwanath did not receive a response to this letter.
Mr Overland gave the following evidence about the receipt of Mr Baragwanath’s email:
Q.And it was comforting, wasn't it, to receive a communication from a person who was a member of the local community offering his services and being a person who clearly had thought about issues.
A.    It wasn't comforting. This is the equivalent of cold calling on the telephone. Mr -
Q.    Why do you say that.
A.No, hang on a second. I didn't know Mr Baragwanath at all. He wrote to me and said that he wanted to do these things and thought he could help. As far as I was aware, he knew nothing whatsoever about hospitals. Why would we suddenly decide that on the strength of one email from a person we didn't know who had not, to the best of my knowledge, even been a member at that point, change course? [45]
[45] T431.1-15.
He went on to say:
A.I'm probably being a bit unkind in using that terminology, but this came out of nowhere as a were, from a person I didn't know that had no previous association with the hospital as far as I was aware, who had no background or record in hospitals. Why would we as a board having spent a great deal of time and energy thinking about what might happen in the future on the strength of one email from one individual decide to bring a halt to a process that we'd already agreed to undertake.[46]
[46] T432.11-20.
He then said:
A.We were going to take the views of members, that was our obligation. Our obligation was to inform and to advise our members and to make a recommendation, which we had done. I should also say that we'd been the beneficiaries of two consultancy reports in relation to the viability of the hospital, and what it may or may not have been able to do in relation to the provision of public health services. So we viewed this in that context. Why would we need yet another investigation into what the hospital may or may not be able to do.[47]
[47] T433.32-434.3.
Mr Overland was unable to recall if Mr Baragwanath’s email was circulated to the Board, although he could recall speaking to some of the Board members about it. He also agreed that the Board had no interest in investigating any option other than the transfer of the Association’s assets to the JBMT.[48] He said:
A.... We felt we were given earnest consideration to the various options or feasible options that were available, and we certainly didn't want to take yet another what amounted to a consultancy to look at further options. We felt we'd been properly advised. As I said to you, we had two previous major consultancies undertaken. We had years of experience in running the hospital. We were well aware of the situation. We knew that there was no chance at all that the hospital could actually be operated viably as a private hospital, that had been made very plain to us years before, by Asia Australis, and nothing in our subsequent experience had caused us to believe otherwise. So that was the context, right, in which this was viewed.[49]
[48] T435.16.
[49] T435.16-30.
Mr Davis said that he was told about the proposed closure of the hospital by Mr Baragwanath, who also told him that there were a number of disgruntled members as a result. He said:
And I also thought it was very strange that during a ramping crisis you'd be closing hospitals. And then he suggested that I become a member, so I did.[50]
[50] T189.17-19.
Mr Davis considered that what was happening with the hospital was wrong and not in the interests of the community and the state. Mr Davis joined the Association on 2 May 2023.
In late March or early April 2023, Mr Baragwanath made a comment about the closure of the hospital and the proposed merger with the JBMT on the McLaren Vale Facebook page. This led to his being contacted by Becky Hirst, who had been a member of the Association’s Board in the past.
Ms Hirst and Mr Baragwanath decided to set up a Facebook page dedicated to the hospital, to allow people to express their views freely about the closure of the hospital and the JBMT proposal. Mr Baragwanath’s evidence was that the page is still operating and has around 400 members.
On 4 April 2023, a letter was sent to the Association’s members from Mr Overland, giving notice of a special general meeting on 5 May 2023 at which they would be asked to vote on resolutions.[51] The letter said (amongst other things):
The decision has been made to negotiate with a not for profit provider which already provides an important local service in our community that aligns with the objectives of the hospital.
We do not believe the community would support the sale of the property to a private developer for commercial purposes.
…
Kalyra is a trusted not for profit aged care provider and through an arrangement with them key services including the Wellbeing GP clinic, Clinpath, SA Ambulance Service and the volunteers’ Op Shop and shed will stay. As well Tsong Gyiaou will be preserved and its tenants can stay.
[51] A1, document 66.
With Mr Overland’s letter was the notice of the special general meeting. The notice contained the two resolutions that were to be put to the meeting. The first resolution was:
That for the purposes of Rules 5(b) and 17 of the Constitution and sections 25 and 43(2)(a) of the Associations Incorporation Act 1985, and for all other purposes, the Hospital be empowered and authorised to transfer to James Brown Memorial Trust the assets and undertakings of the Hospital on such terms as the Board determines.
The second resolution was:
That for the purposes of Rule 16 of the Constitution and Part 5 of the Associations Incorporation Act 1985, and for all other purposes, the Board be empowered and authorised to wind up or deregister the Hospital.
The notice of the special general meeting contained explanatory notes, which explained who was entitled to vote at the meeting and how a member could vote by proxy. In addition, it provided an explanation of the resolutions. In relation to the resolution to wind up the Association, the explanatory notes said:
Following the scheduled close of the operations of the Hospital on 30 June 2023, the board has determined that the appropriate course is for the Hospital to be wound up or voluntarily deregistered. Provided that the resolution in relation to item 1 of this notice of meeting is passed and the assets and undertakings of the Hospital have been disposed of to Kalyra, the Hospital will no longer have any utility as an incorporated association. In that event, the winding up or voluntary deregistration of the Hospital is the prudent course.
Mr Baragwanath and Ms Hirst hosted an online community forum, to provide members of the community with information about the closure of the Hospital and the JBMT proposal. Approximately 45 people attended the meeting. In cross‑examination, Mr Baragwanath said that, by this time, he had formed the view that members of the community should be encouraged to join the Association. He had also considered taking some form of legal action but had not done so. Nor had he, at that point, turned his mind to who should be on the Board of the Association should the current Board resign, although he had considered the possibility of the Board’s resignation.[52]
[52] T121.28-31.
Mr Baragwanath denied that he was promoting a joint venture or other relationship with a for-profit organisation. He proposed the Pelligra plan merely as an example of what might be possible. He said that his objection to the JBMT proposal was not related to the JBMT, but to the fact that a valuable asset was being given away.[53] He also denied that he was motivated by any thought of personal profit or opportunity.
[53] T123.6-7.
Mr Baragwanath’s evidence was that he spoke to Mr Overland on 5 April 2023. He said that they had a professional, friendly conversation. Mr Overland described his background in the health sphere and Mr Baragwanath explained his experience in charities and financial services. After discussing the financial position of the hospital, Mr Baragwanath said the following conversation took place:
Mr Overland was clear in saying that essentially the board had put a lot of time and a lot of effort over a long period of time and that they were tired, and that they'd frankly had enough.[54]
[54] T83.28-31.
Mr Baragwanath said that Mr Overland told him that he had taken an architect through the building and was told that it would be too hard to renovate, and that it would be easier to knock it down and build a new one, but that the Association did not have the money to do that. He said that Mr Overland was very clear that the hospital would close on 30 June 2023 and that “specialist procedures needed specialist facilities that were not available.”[55]
[55] T85.36-86.1.

A third matter can also be dealt with as a preliminary matter. Mr Davis has criticised Mr Overland for drafting (or assisting with the drafting of) the JBMT’s proposal. The Association has criticised Mr Baragwanath for drafting the Pelligra letter. There is nothing in either of these criticisms. One can assume that neither Mr Pelligra nor Ms Blunt signed a document that they were not comfortable to sign.
I will, in any event, consider all of the decisions and actions of the Board from 25 January 2023 to 4 July 2023, to determine whether the Association has engaged in conduct that is oppressive or unreasonable.
The period from mid December 2022 to 25 January 2023
Mr Dal Cin submitted that the actions and decisions of the Association during this period were contrary to the interests of the members as a whole. He said that they were intended to defeat the objects of the Association.
Mr Dal Cin submitted that the Court should find that no board, acting reasonably, could have made the decision on 25 January 2023 to close the hospital. The decision to close was contrary to the interests of members as a whole because it defeated the pursuit of the Association’s objects, set out in clause 4(b), (c), and (d) of the Constitution. Further, he said that the members were deprived of the opportunity to consider alternative uses for the Association’s assets. He said that, while it was clear that there were ways that the Association could pursue its objects other than running a hospital, it was for the members to make those decisions, not the Board.
Mr Davis does not seek a remedy with respect to this decision; he is aware that it will not be possible to require the Association to resume the operation of the hospital. He says, however, that it remains relevant as part of the background to the conduct leading to resolution passed at the July meeting, in relation to which he does seek a remedy.
Mr Dal Cin submitted that the decision made on 25 January 2023 should be impugned for two reasons: first, it was based on the assumption that Dr Lovell intended to retire in June 2023 as a result of which the hospital would not be able to fulfil its contractual obligations to SALHN; and second, it was motivated by political considerations, in that it was undesirable to close the hospital too close to the next state election.
In support of these contentions, Mr Dal Cin relied on the statements made by Mr Overland at the 2022 Annual General Meeting about its financial position, and the prediction that the hospital had a further “life” of three to five years. He also pointed to the other communications later in 2022 which made similar statements and prognostications. Mr Dal Cin also relied on the statements made by Mr Overland during this period, to the effect that the Association had time to consider its future operations when it was no longer operating a hospital. He says that it is clear from these communications that Mr Overland foresaw a future where the Association continued to fulfil its objects other than through operating as a hospital.
Mr Dal Cin submitted that, while Mr Overland continued to report on the Association’s financial position in a consistent manner, the retirement of Dr Lovell and the Board’s own workload began to take more prominence in the latter part of 2022 and early 2023. He goes so far as to submit that the Court should infer that discussions with SALHN must have turned to the closure of the hospital, because of the critical effect that Dr Lovell’s retirement would have on its operation.
Further, Mr Dal Cin submitted that the Court should find that Mr Overland’s change in tone was in part motivated by the fact that closure of the hospital within the predicted three year time period would place that event at the same time as the next state election, a fact that was obviously raised in his 7 December 2022 meeting with SALHN.
Mr Dal Cin said that the Court should find that the decision to close the hospital was caused by the combined factors of Dr Lovell’s supposed retirement, the limited funding, to 30 June 2023, offered by SALHN in January 2023 and the need to avoid closure too close to the next state election.
It was contended by Mr Dal Cin that I should find that, at the Board meeting on 25 January 2023, the discussion that led to the consensus to close the hospital was a short one and came at the end of a long meeting. He said that I should reject any evidence of Mr Overland to the contrary. He said that I should find that the Board assumed, from the limited funding grant, that SALHN believed that the government wanted the hospital to close well before the next election. This is supported, he contended, by the statement in the Board minutes that Mr Overland should write to the Minister in terms “suitable for inclusion in Hansard.”
Mr Dal Cin said that it was clear from Dr Lovell’s evidence that he did not intend to retire in June 2023, and in fact, had not done so. The Board acted on an assumption that it did not check. Further, he said that the decision to close the hospital was made because the Board had run out of ideas, and yet did not consider seeking to recruit new members who might have ideas to assist.
Mr Dal Cin submitted that no committee, acting reasonably, could have made the decision to close the hospital, which was central to the pursuit of the Association’s objects:
·Without having a properly constituted Board;
·Quickly and at the end of a long meeting;
·Without holding a special general meeting of members to consider the matter;
·Without asking Dr Lovell about his intention to retire; and
·While prioritising political considerations over the interests of members.
Mr White submitted that the decision of the Board to close the hospital was a reasonable exercise of its powers. He said that on no basis could it be said that no reasonable board would have made the decision to close the hospital. He submitted that the evidence, both documentary and oral, demonstrated that the hospital had been in a precarious financial position for many years and was heavily dependent on government funding. In addition, it demonstrated that the hospital had other, almost insurmountable, challenges, including recruitment and retention of doctors, the ability to pay competitive salaries to nursing staff, and aging infrastructure.
I do not consider that the conduct of the Board leading to the decision, or the decision itself, to close the hospital were oppressive or unreasonable. I am mindful that I am not called upon to decide whether the decision to close was the correct one; indeed, on the evidence before me, I could not make such a decision. I consider that the evidence sufficiently demonstrates the challenges faced by the hospital to remain viable, and I accept the evidence of Dr Lawlor-Smith, Dr Lovell and Mr Overland that the hospital had been in a precarious position for many years. It is perhaps unfortunate that Mr Overland (or someone else) did not ask Dr Lovell what his retirement plans were; nonetheless, I do not consider that that failure rendered the decision to close the hospital as one that no reasonable board could have made.
I consider that the ongoing operation of the hospital was a management consideration properly dealt with by the Board. The closure of the hospital as a result of its inability to remain viable, is not the type of decision which should properly go to the members; it is a business decision based on financial and other circumstances to which the members would not ordinarily be privy. It cannot be suggested that the members could have compelled the Board to continue to run the hospital when it was no longer financially able to do so.
I note that Mr Dal Cin invited me, in effect, to delve into the finances of the Association, in order to demonstrate that its financial position was better than that represented by Mr Overland. I decline to do so. In a hearing such as this it is neither possible nor appropriate to conduct such a broad and wide reaching investigation, which must necessarily require expert evidence and the examination of issues far broader than were adduced in this trial. I accept the evidence of Mr Overland as to the financial state of the Association and the viability of the hospital.
I also reject Mr Dal Cin’s submission that the decision to close the hospital served to defeat the pursuit of the Association’s objects. The objects of the Association are very broad and are not limited to operating a hospital. The Association is required “to provide the community with a viable and sustainable health care service”[204]; this can be done in ways other than through a hospital.
[204] A1, document 3, clause 4.
Were it not for the fact that the Board was not properly constituted, I would find that the decision made on 25 January 2023 to close the hospital and the conduct leading up to that decision cannot be impugned.
The period from 25 January 2023 to the May meeting
Mr Dal Cin submitted that the affairs of the Association were conducted in a manner contrary to the interests of the members as a whole during this period on the basis that:
·The Board was not properly constituted;
·The evidence indicates that the Board and Mr Overland pursued the JBMT proposal to the exclusion of other options;
·Mr Overland engaged with Ms Blunt to have a firm proposal ready for the Board meeting on 23 February 2023; and
·The evidence makes it clear that there was no intention to consult members about possible options, but only to engage with “the community” once the JBMT proposal was finalised.
In particular, Mr Dal Cin noted that the minutes of the March Board meeting did not contain a resolution to pursue the JBMT proposal and the winding up of the Association; rather, it appears that the Board operated on the basis of an assumption that these decisions had been made. He said that the Court should find that there was no discussion at that meeting about alternatives to the JBMT proposal, including consideration of the Asia Australis report which recommended investigation of the use of the site as a “health hub”. Further, he said that it must be inferred that there was no consideration by the Board of a commercial arrangement with the JBMT which would allow the Association to continue to pursue its objects. Mr Dal Cin also asked that I find that the JBMT proposal was, in fact, prohibited by clause 15 of the Constitution.
Mr Dal Cin submitted that the conduct of the Board was contrary to the interests of the members as a whole. He said that the communications of the Board, made on 27 March 2023 to members, the public and staff were misleading in a number of material respects. In particular, he submitted:
·The characterisation of the JBMT proposal as a merger was clearly misleading;
·The various statements to the effect that the Board had considered all the ways of keeping the hospital open were misleading because it was, in fact, motivated by Dr Lovell’s supposed retirement, when it had never asked Dr Lovell about his retirement plans and by political considerations about the timing of the closure;
·Statements in the material to the effect that the position of the hospital’s nursing staff was uncertain were misleading, because by mid-February 2023, SALHN had told the Board that it would offer employment to all nursing staff; and
·The material tended to suggest that the decision to close the hospital was not already a fait accompli.
Mr Dal Cin submitted that there was no evidence that Mr Baragwanath’s email was ever considered by the Board, or by members of the Board, other than Mr Overland. He said that I should reject Mr Overland’s evidence that it was discussed informally by members of the Board. Mr Baragwanath offered to do that which had been recommended by Asia Australis, and yet he was dismissed as the “equivalent of cold calling”. Mr Dal Cin submitted that I should find that he was dismissed because his views did not correspond to those of the Board.
The applicant contended that the notice of the May meeting was misleading because it mischaracterised the JBMT proposal as a merger. Further, he contended that I should find that the statements that the hospital was not financially viable were also misleading.
Mr Dal Cin said that the information material produced by the Board represented that it had considered the possibility of redeveloping the hospital, developing the site as a health hub or selling it, when this clearly was not the case. In relation to a sale of the site, the Board sought to create the impression that the tenants on the site would be put at risk, despite the registered leases held by Wellbeing and SAAS. It further suggested that the net proceeds of any sale would be a problem.
Once the Board received the Pelligra letter, Mr Dal Cin submitted that it made a further misleading statement: that it had considered and rejected the proposal in that correspondence. There is, in fact, no evidence that the Board considered the Pelligra letter.
Mr White submitted that it was reasonable for the Board to consider that the Association did not have the financial or management capacity to undertake a redevelopment of the site to allow it to use the site for some other purpose. Mr Overland was clear in his evidence to this effect and it was not seriously challenged. Further, Mr White said that, while there was limited formal documentation of the consideration given by the Board to alternative proposals for the use of the Association’s assets, the Board was well aware of the various options open to it. It was also reasonable to prefer an option that did not involve a for-profit organisation and one that guaranteed the protection of the existing tenants and the heritage elements of the site.
Mr White submitted that the decision by Mr Overland and the Board to develop and recommend a single proposal to members was a legitimate one that was clearly reached in good faith. The criticism of the lack of documentation of the Board’s consideration of the options should be viewed against the background of the extensive experience of the various board members; the failure to document the ins and outs of their deliberations does not lead to the inference that those deliberations did not occur. Mr White further submitted that regard must be had to the fact that Board members were unpaid volunteers.
Mr White contended that it was not unreasonable for Mr Overland and the Board to ignore Mr Baragwanath’s approach during this period. He was not a member of the Association and had no association with it or with the hospital system generally. He was completely unknown to Mr Overland and there was no reason to interrupt the process which had been put in place against a background of significant experience of the Board members and their deep familiarity with the Association and the operation of the hospital.
I do not consider that the affairs of the Association were conducted in an oppressive or unreasonable manner in the period between 25 January 2023 and 5 May 2023. I do not consider that it was unreasonable for the Board and Mr Overland to reject Mr Baragwanath’s approach; the Board had been working diligently to keep the hospital operating for many years and could be expected to be far more au fait with its operation and the requirements to run a hospital, than a person who had never shown any interest in the Association in the past. The decision, in effect, to ignore Mr Baragwanath’s approach was not one that no reasonable board could have made. On the contrary, I consider that it was not unreasonable.
I also do not consider that the various communications issued by the Board were misleading as alleged by the applicant. The juxtaposition of the two resolutions, to give the Association’s assets to the JBMT (subject to the negotiation process concluding successfully) and to wind up the Association can have left no one in any doubt as to the true nature of the transaction: once the Association’s assets had been divested, the Association would cease to exist. In this context, I do not consider that the use of the term, “merger” was in anyway misleading.
I accept the evidence of Mr Overland that the Board had in fact considered the various ways to deal with the Association’s assets, although these considerations were not documented. The Board had had the benefit of the Asia Australis report and had discussed its finding and recommendations. It was open for the Board to conclude that the Association had neither the money nor the management ability to investigate or develop the “health hub” option, bearing in mind that the hospital was run by unpaid volunteers.
I also reject the criticism of the Board’s presenting the closure of the hospital as a fait accompli. It was a fait accompli. As I have found, the decision to close the hospital was a management decision to be made by the Board.
Like the conduct of the Board to 25 January 2023, were it not for the fact that the Board was not properly constituted, I would find that there is no basis for impugning its actions and decisions in the period between 25 January 2023 and 5 May 2023.
The period from 5 May 2023 to the July meeting
Mr Dal Cin submitted that, once the resolutions put to the May meeting had been defeated, the Board was required to operate in a manner that pursued the objects of the Association. Instead, it colluded with Dr Lawlor-Smith to undermine the outcome of the May meeting.
Mr Dal Cin submitted that I should treat the evidence of Dr Lawlor-Smith with caution. He said that I should reject her evidence that she had a real concern about the risk posed to the Wellbeing by any option other than the JBMT proposal. Further, I should find that if she had such a concern, she would have obtained legal advice. The fact that she did not do so suggests that she did not have a genuine fear.
Mr Dal Cin made numerous other submissions about Dr Lawlor-Smith, the financial interest of Wellbeing in any decision made about the hospital site and various other aspects of her conduct. I will not recite them here for reasons that I will explain in due course.
Mr Dal Cin submitted that I should find that the Board enthusiastically embraced Dr Lawlor-Smith’s plan. He submitted that I should draw an adverse inference against the Association for its failure to make discovery of the minutes of the informal meeting on 10 May 2023 until their existence became clear in the course of Mr Overland’s evidence. He said that I should infer that the Association deliberately tried to suppress this evidence. He further said that I should find that Mr Overland sought to downplay the meeting in his evidence in chief. He said that I should draw an adverse inference against the Association for its failure to call any Board member to give evidence other than Mr Overland.
Mr Dal Cin asked me to make a number of findings in relation to the meeting on 10 May 2023. These were:
·That the Board considered that it was permissible to put the failed resolutions to a second special general meeting;
·That the resolutions would be separated and dealt with at separate meetings because the Board understood that members were less likely to support the JBMT proposal if it was linked with a resolution to wind up the Association;
·That there was discussion about Dr Lawlor-Smith’s plan and an agreement to support it;
·A decision was made to hold the second special general meeting on 4 July 2023 with notice of the meeting to be sent out on 2 June 2023;
·The date for the issuing of the notice was chosen to give Dr Lawlor-Smith time to recruit as many new members as possible, while limiting the amount of time that Mr Baragwanath would have to recruit members.
It was contended by Mr Dal Cin that, once the resolutions had been defeated at the May meeting, it was the duty of the Board to pursue the objects of the Association, including by seeking to negotiate a commercial arrangement with the JBMT, in accordance with the document prepared by Ms Blunt.

Mr Dal Cin described as a “charade” the Board’s acceptance of Dr Lawlor‑Smith’s request for a second special general meeting and the fixing of the date for that meeting at its meeting on 25 May 2023, when these actions had already been decided on at the 10 May 2023 meeting and Mr Overland had, himself, drafted the letter with the resolution for Dr Lawlor-Smith to send to him.
Mr Dal Cin also submitted that I should find that the update to members, sent on 26 May 2023, was misleading. First, it sought to suggest that there were only two options: the JBMT proposal, and those opposed to it, who sought to involve a private developer. Second, it suggested that only the JBMT proposal would protect Wellbeing, the SAAS ambulance station and the heritage aspects of the site. Third, it stated that the Board was considering the next steps for the site when in fact it had already determined its next steps at the meeting on 10 May 2023.
The applicant also impugns the appointment of Mr Botha to the Board. He says that Mr Botha’s only qualification for appointment was that he would support the current Board, thus overlooking Mr Baragwanath, who had offered to serve on the Board but clearly took a different view to the other Board members.
Mr White submitted that the meeting on 10 May 2023 amounted to no more than an informal discussion between some of the Board members and Mr Bignell about what they should do next. This does not amount to oppressive or unreasonable conduct, particularly given the very narrow margin by which the JBMT proposal was defeated at the May meeting.
Mr White submitted that any suggestion that the date of the July meeting was chosen to assist Dr Lawlor-Smith’s recruitment efforts should be rejected. He submitted that I should accept Mr Overland’s evidence that the date of the July meeting was dictated by the requirements of the Constitution, and that both sides had time to campaign.
Mr White contended that I should reject the applicant’s suggestion that Mr Baragwanath was no longer pushing for a Board spill in his email of 11 May 2023, and that Mr Overland was manipulating him by assisting him to call a further special general meeting to require the Board to stand down. The email, when read carefully, sets out six requirements, including the appointment of an eighth board member, and even so, does not unconditionally withdraw the request for a Board spill. Mr White contended that I should find that it was appropriate for the Board to facilitate the spill motion.
Mr White submitted that there can be no real complaint about putting the JBMT proposal to the members a second time. Any member was entitled to call for a special general meeting, and Dr Lawlor-Smith did just that. It is irrelevant that the resolution that she proposed was the one that the Board supported.
Mr White also submitted that Mr Overland’s use of the term “merger” was not misleading in a real sense, even though it did not reflect the legal nature of the transaction. He submitted that it was clear from the outset that the Association’s assets would be transferred to the JBMT and that the Association’s members would not become members of the JBMT as it is not a member-based organisation.
I do not consider that the actions of Dr Lawlor-Smith or her motivations are relevant to the issues in dispute in this matter. I make no criticism of her or her motivations, and I have already found that she genuinely held the fears that she expressed for the ability for Wellbeing to remain on the hospital site. As a member of the Association, I consider that Dr Lawlor-Smith was entitled to take whatever action she considered appropriate to gain the support for the proposal that she favoured. This includes seeking out members, undertaking a social media campaign and sending correspondence to patients and staff. Even if not everything in that correspondence was completely accurate, that does not expose her to sanctions under the Act. As a result, I do not address the submissions made by Mr Dal Cin about her and her conduct as I do not consider that they are relevant. What is relevant are the actions of the Board in response to the things that she was doing.
I consider that the conduct of the Board was oppressive in a number of respects in the period from 6 May 2023 to 4 July 2023.
First, I consider that it behaved unreasonably in working with Dr Lawlor‑Smith to resurrect the JBMT proposal, without advising Mr Baragwanath that it was doing so. Even though it was not a formal board meeting, the reality is that at the informal meeting on 10 May 2023, at which all Board members except for one were present, the Board determined to hold a second special general meeting on 4 July 2023 to reconsider the JBMT proposal. It also determined that, based on the terms of the Constitution, a member must have joined the Association by 7 June 2023 in order to be eligible to vote. It ensured that Dr Lawlor-Smith was advised of these dates on 10 May 2023. The meeting on 10 May 2023 was treated by the Board members as a forum to determine and set in train its next steps with regard to the JBMT proposal. I infer that the Association did not call any other Board members to give evidence on this question, because their evidence would not have supported the Association’s position.
The Board received Dr Lawlor-Smith’s request for a special general meeting on 26 May 2023 and gave members notice of that meeting on 2 June 2023, only five days before the deadline for members to join so as to be eligible to vote. This deprived all members other than Dr Lawlor-Smith of the ability to recruit new members to support their position.
The evidence of Mr Baragwanath and Mr Davis was clear: they had no idea that a second meeting was going to be called to reconsider the JBMT proposal until they received notice of the meeting, or even that the Association intended to resurrect the JBMT proposal. It is not to the point to say that they had been recruiting members to the Association in any event. They may well have been doing so, but without any knowledge that there was a deadline for that recruitment so that time was of the essence. Dr Lawlor-Smith, however, was aware from 10 May 2023 that she had to have members signed up by 7 June 2023 in order to be eligible to vote at the special general meeting. This gave her (and the Board) a significant advantage over Mr Baragwanath and other members who might have wished to rally support for their preferred position. I consider that this conduct of the Board was oppressive. Given that there were two clear camps recruiting members, the Board should have ensured that each camp, and indeed all members, were informed about the deadline that they faced with regard to recruitment.
I reject the submission that the date for the meeting was dictated by the terms of the Constitution. As I have already observed, 4 July 2023 was more than sixty days after Mr Baragwanath requested a special general meeting. And the terms of the Constitution did not prevent the Board from giving all members the same amount of notice of the meeting date as it gave Dr Lawlor-Smith.
Second, I consider that a number of the Board’s communications were misleading, to the extent that they were unreasonable. By the time that the Board issued its update to members on 26 May 2023, it was well aware that Mr Baragwanath and his faction were no longer promoting the Pelligra proposal.
As early as 4 May 2023, Mr Baragwanath made it clear that he had an open mind about what to do with the site. In his Facebook post on that day, he said the following about giving his proxy to Ms Tassie to exercise at the May meeting:
If she’s convinced on the day to gift the hospital site to Kaylra (sic) I’ll support it, if she notes no I’ll do my best to help.[205]
[205] A1, document 105.
Mr Baragwanath’s email of 8 May 2023 referred to investigating and documenting alternatives for the site and did not refer to the Pelligra proposal. His email of 11 May 2023 proposed a twelve-month period of community consultation to devise a range of options for use of the site. He also made a number of public Facebook posts which should have made it completely clear to the Board that he was no longer pursing the Pelligra proposal.[206] And, on 30 June 2023, a story published on the ABC News website quoted Ms Tassie, one of Mr Baragwanath’s key supporters, as saying:
We need to look at all the options, including Kalyra, but do what’s best for the community.[207]
[206] See A1, document 157 and R3.
[207] R27, document 3.
Despite these direct statements to the Board, and the other public statements, the Board still made the following representations:
·On 26 May 2023, that an alternative proposal was being promoted which would place the site in the hands of a private developer to be used for unspecified purposes; and
·On 2 June 2023, in the question and answer document sent to all members, that a group was proposing a joint venture with a private developer whose aim was to make a profit from the site.
In addition, the Board suggested in each of these communications that the tenants currently using the site, Wellbeing and the SAAS ambulance station would be at risk if any organisation other than the JBMT took over the site, as would the heritage aspects of the site. This completely ignores the registered leases in favour of Wellbeing and SAAS ambulance station and suggests that it would be impossible to reach an agreement with any other organisation about the heritage features. These statements can only be regarded as an attempt to instil fear and uncertainty into members’ minds about the prospect of anyone other than the JBMT taking over the site.
I consider that these misrepresentations were unreasonable, and that no reasonable board would have engaged in that conduct. I consider that they extend beyond giving an unbalanced account of the arguments on each side of the debate or recommending one option over the other.
In the case of Margaretic v Western Australian Trotting Association [No 3],[208] Kenneth Martin J considered the question of the need for a board to put a balanced case in favour of the various issues to be decided by members. He said:
Further, the context around the Committee's decision to hold the 2022 Referendum is vital to weigh, overall. Manifestly, the Committee, in effect, as the defendant's governing board of management, expressed a collective view to voting members that the proposal which they place before the voting members via the 2022 Referendum, should be approved. That is hardly a surprise. Were that not the case, there would likely not be a referendum put. An element of merits imbalance necessarily presents then as from the time of the Committee's resolution to hold such a referendum to obtain the authority needed for what is proposed vis-à-vis a sale of part of its land at Gloucester Park.[209]
[208] [2023] WASC 229.
[209] Ibid, [233].
He went on to say:
For those alleged omissions from the 'No' case (which captures most of the plaintiff's grievances) - my view is that there needs to be shown what is a material omission. Such omission would need to be shown as of such a magnitude and force, bearing upon a hypothetical voting member of the defendant, that a court ought, on an objective basis, be left comfortably satisfied (on the balance of probabilities) that the omission of that factual information to the member (from out of the voting package materials provided to the voting member) can be assessed by the court as being more likely than not to have misled the member. In other words, the non-disclosure of the omitted fact must be assessed as more likely to have led a member, objectively assessed, to a negative position on the 2022 Referendum question.
That is a high standard of required materiality, which I would assess is applicable both to any alleged falsehoods and to omissions. That high standard would be in alignment with a policy respecting board management taken commercial decisions, as matters of autonomous business judgment - canvassed earlier by regard to multiple case authorities decided in the statutory oppression context.
Put another way, a falsely stated fact, or an omitted fact, would need to be shown as of such a magnitude that a court could safely conclude that a board of management (ie, here, the defendant's Committee) was not acting in good faith, by allowing that state of affairs to be put (or not put) to the eligible voting members, when their voting package materials were sent out to members.[210]
[210] Ibid, [258] – [260].
Mr White submitted that the effect of this decision is that there is a high bar before a court will find oppression and grant a remedy with respect to it. He said that there must be manifest misconduct on the part of a board before finding of oppression can be made. This submission cannot be accepted. The authorities that I have previously referred to make it clear that a Board may act in an oppressive manner, despite acting in good faith. In fact, Besanko J went as far as to say:
…it is not necessary in order to bring conduct within the terms of the section to establish any actual irregularity or invasion of legal rights or a lack of probity or want of good faith.[211]
[211] [2003] SASC 1, [135].
This was affirmed by White J in Pettit.[212]
[212] [2006] SASC 306, [26].
I consider that the misrepresentations made by the Board are material misrepresentations. They extended far beyond recommending one course over another, or spruiking the benefits of the JBMT proposal without addressing the proposal for consultation. They completely misrepresented what would be the result of a no vote and so deprived members of the ability to make an informed choice at the July meeting.
I further consider that the Board behaved unreasonably in characterising the JBMT proposal as a merger. Unlike at the May meeting, it was not coupled with a resolution to wind up the Association. It could be inferred that the winding up of the Association was no longer planned, and that it would continue to exist in one form or another. The failure to make it clear that the winding up of the Association would still occur coupled with the use of a word that suggested an ongoing existence was misleading and unreasonable.
For completeness, I do not consider that the appointment of Mr Botha to the Board, rather than Mr Baragwanath, was oppressive. Clause 8.4 allows the Board to appoint a new member to fill a casual vacancy. The Board is not restricted as to whom it will appoint in this regard.
For these reasons, I find that the conduct of the Board in the period between 6 May 2023 and the July meeting was oppressive and unreasonable.
The applicant contends that the resolution passed on 4 July 2023 was, in itself, contrary to the interests of members as a whole. This is on two grounds. The first is that it is possible, if not likely, that many of the members who joined the Association at the instigation of Dr Lawlor-Smith were not valid members. This is because, in supporting the JBMT proposal, they did not support the objects of the Association, as required by clause 6.1 of the Association. In fact, Mr Dal Cin submits that they joined with the intention of voting in favour of a resolution that would defeat the objects of the Association.
I do not accept this submission. It is not clear to me that voting for the JBMT proposal is contrary to the objects of the Association. It is arguable that there are circumstances where the only way of achieving the objects of the Association would be by transferring its assets to a larger, better resourced charity.
The other ground relied on by the applicant is that the proxy form did not set out the resolution in full but merely asked members to vote in favour of or against a merger with the JBMT. I have already set out my conclusions about the use of the word “merger” in relation to the second special general meeting. It follows that I find that the proxy form was misleading to the extent that it was oppressive.
The applicant asks me to find that the Association’s refusal to engage in mediation or utilise the dispute resolution provisions in the Constitution also amounts to conduct which is contrary to the interests of the members. I do not accept this submission. Throughout the trial, each side made a range of accusations against the other about the failure to engage in mediation, the delay in prosecuting the action and other procedural matters. It is not possible now to determine where the fault, if any, lies for a refusal to engage in some form of alternative dispute resolution.
Conclusion
I find as follows:
1.The conduct of and decisions made by the Board of the Association, between the period December 2022 and 25 May 2023 were invalid because the Board was not properly constituted.
2.Otherwise, I find that the Association did not engage in conduct that was oppressive or unreasonable during this period.
3.Between 10 May 2023 and 4 July 2023, the Association engaged in conduct that was oppressive and unreasonable.
This leads me to the question of remedies.
Mr Davis submitted that I should, in effect, restrain the Association from entering into any transaction that would have the effect of transferring its assets to the JBMT. I should also require the Association to appoint a committee, comprised of himself, Mr Baragwanath and two nominees of the Board to investigate the alternative uses for the assets of the Association and to report to members.
Mr White submitted that I have a discretion as to the remedy to be granted and that I must consider what any remedy would achieve. He further submitted that, by the July meeting, the membership of the Association was much more representative of the community than it had been previously. This greatly expanded membership overwhelmingly supported the resolution to transfer the Association’s assets to the JBMT. This should be taken into consideration when fashioning any remedy. While I accept that I have a broad discretion when it comes to remedy, I reject the submission that I should take into consideration the support that the expanded membership of the Association showed for the JBMT proposal. As I have explained, I consider that this goes to the very heart of the Association’s oppressive conduct.
In the time since the July meeting, the JBMT and the Association have undertaken an extensive community consultation process. This was described by Ms Blunt in her evidence.[213] She also said that no agreement had yet been entered into with the Association for the transfer of its assets and that she did not consider that it was possible to proceed with this while this legal action was continuing. It may well be that further consultation, as envisaged by Mr Davis, is no longer necessary, or may be carried out in a different manner to that originally planned, given the community consultation that has occurred in the last year.
[213] T732.22-733.9.
I consider that time should be allowed for the parties to consider the remedies available in light of this decision. I also urge them to consider the question of mediation, having regard to the community consultation that has occurred to date and what that consultation has revealed.

[2024] SASC 119

14 October 2024