Enagic Australia Pty Ltd v Direct Selling Australia Ltd

Case •

[2025] NSWSC 514

•

22 May 2025

No judgment structure available for this case.

Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: Enagic Australia Pty Ltd v Direct Selling Australia Ltd [2025] NSWSC 514
Hearing dates: 14 May 2025
Decision date: 22 May 2025
Jurisdiction:Equity
Before: Stevenson J
Decision:

On the proper construction of the defendant’s constitution, the board of the defendant was not empowered to determine that the plaintiff was ineligible to remain a member of the defendant by reason of allegedly having the association referred to at cl 2.3(f) of the defendant’s constitution

Catchwords:

CORPORATIONS – constitution and replaceable rules – construction of company’s construction – company limited by guarantee – whether board empowered to decide that plaintiff’s membership not be renewed – where constitution makes elaborate provision for dealing with sanctionable conduct – whether board may bypass those procedures and itself determine that membership should not be renewed

Legislation Cited:

Corporations Act 2001 (Cth)

Cases Cited:

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12

Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

HNA Irish Nominee Ltd v Kinghorn [2010] FCAFC 57

Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144

Miles v Luneburger Franchising Pty Ltd [2021] NSWCA 248

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Reardon Smith Line Ltd v Hansen-Tangen; Hansen-Tangen v Sanko Steamship Co [1976] 1 WLR 989; [1976] 3 All ER 570

Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47

Victoria v Tatts Group Ltd [2016] HCA 5

Texts Cited:

K Lewison and D Hughes, The Interpretation of Contracts in Australia (2nd ed, 2025, Thomson Reuters)

P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters)

Category:Procedural rulings
Parties: K&L Gates (Plaintiff)
Russell Kennedy Pty Ltd (Defendant)
Representation:

Counsel:
L Muir (Plaintiff)
I J King (Defendant)

Solicitors:
Russell Kennedy Pty Ltd (Plaintiff)
K&L Gates (Defendant)
File Number(s): 2025/178047

JUDGMENT

  1. The plaintiff, Enagic Australia Pty Ltd, was, until 31 March 2025, a member of the defendant, Direct Selling Australia Ltd (“DSA”). It first became a member of DSA in 2010.

  2. On 9 April 2025 DSA notified Enagic that it was “not renewing Enagic’s membership”.

  3. DSA’s decision was made by its Board, relying on cl 2.3(f) of DSA’s constitution (the “Constitution”). Clause 2.3(f) provides, relevantly, that a person is eligible to remain a member of DSA if it is “not associated” with persons who promote, encourage or incite non-compliance with the Constitution, DSA’s Code of Practice (the “Code”) or any policy, standard or condition the Board may determine (the “Board Policies”).

  4. The Board determined that Enagic was so “associated” with such persons and thus no longer eligible to remain a member.

  5. The question is whether, on the proper construction of the Constitution, the Board had the power to make this determination.

  6. Thus, Enagic seeks a declaration that, on the proper construction of the Constitution the Board’s decision was of “no effect”.

  7. I am not asked to determine whether, as a matter of fact, Enagic had the posited “association”. In effect, I am asked to assume this for the purpose of the proceedings.

Enagic and DSA

  1. Enagic manufactures and sells water purification and ionisation devices. Enagic operates using a multilevel marketing model under which independent distributors sell Enagic’s products.

  2. Enagic’s business model is one of direct selling. Direct selling is a form of retailing where products and services are marketed to customers directly through independent sales consultants, known as distributors. The distributors contract with various direct selling companies. Enagic is such a direct selling company. It currently has some 9,400 distributors.

  3. DSA is a trade association and representative body for direct selling companies in Australia. It is a member of the World Federation of Direct Selling Associations.

  4. DSA is a company limited by guarantee. Its operation is regulated by its Constitution. The Constitution operates as a contract between DSA and its members. [1]

    1. Corporations Act 2001 (Cth), s 140.

  5. DSA does not hold any government role and membership of DSA is not required by any legislation.

  6. The purposes of DSA are outlined in cl 1.1 of its Constitution as follows:

“1.1   Principal Purpose

The Principal Purpose of the Company [DSA] is to build understanding and support for Direct Selling in Australia. The Company supports Direct Selling companies and Independent Sales Consultants by:

(a)   promoting and advocating for the industry’s positions and interest with government, media and key influencers;

(b)   protecting and promoting the integrity of Direct Selling channel in Australian retailing, including through self-regulation;

(c)   ensuring the marketing of Products and Direct Selling opportunities by Members and independent Sales Consultant[s] meet high levels of business ethics and customer protection and consumer satisfaction; and

(d)   serving as a trusted resource for information relating to Direct Selling.”

  1. Ms Joanne Badman, the Compliance Officer of Enagic, described the benefits to Enagic of being a member of DSA as follows:

“The DSA has a strong reputation in the direct selling marketplace and is associated with high business ethics, trust and integrity. Being a DSA Member conveys to Enagic’s distributors and to customers that Enagic is a genuine business and will not disappear overnight. It engenders trust with our distributors and clients that Enagic is a reputable company.”

  1. That appears to be reflected by the following publication of DSA:

“The Direct Selling Australia ‘Proud Member’ logo is the mark of trust and integrity in the direct selling industry. DSO Members must complete a rigorous application process to be accepted as members of Direct Selling Australia. This ensures the highest standards of business ethics and operation are maintained in our industry, and protect the rights of consumers and Independent Sales Consultants.”

The renewal process

  1. Membership in DSA is for the calendar year ending 31 March (the “Membership Year”).    

  2. Until this year, the process whereby Enagic renewed its membership of DSA was that in or around February each year, DSA sent Enagic an email requesting that Enagic complete an “Annual Membership Survey”. The survey collected information of a financial nature, including information about Enagic’s income and independent sales people.

  3. DSA used the information it collected in the Annual Membership Survey to determine Enagic’s subscription fees for the next Membership Year.

  4. The annual membership fee for the year ended 31 March 2025 was $19,199. The annual fees for the preceding years were for a similar amount.

The events leading to the purported non-renewal of Enagic’s membership of DSA

  1. In June 2024, the Australian Broadcasting Corporation published an article in relation to Enagic. The article was referred to in an email that DSA sent Enagic on 11 April 2025 notifying it of DSA’s decision not to renew Enagic’s membership. I return to this below. [2]

    2. See [28] below.

  2. On 20 December 2024, the Board of DSA passed a “circulating resolution” that DSA “does not offer renewal of membership for the 2025 to 2026 year to Enagic”.

  3. DSA did not give notice to Enagic that it was contemplating making this decision, and did not notify Enagic of the decision until 9 April 2025. [3]

    3. See [27] below.

  4. Enagic remained listed on DSA’s website as a member of DSA until at least March 2025.

  5. On 8 April 2025, one of Enagic’s distributors sent a text message to a director of Enagic:

“Not sure on name but apparently they called the DSA and they said they are removing affiliation with Enagic. Which is a really concerning big deal. Are you able to contact them and see if that is true?”

  1. That day, Ms Badman checked the DSA website and saw that Enagic was no longer listed as a member on DSA’s website.

  2. Later that day, Ms Badman telephoned an officer of DSA inquiring about Enagic’s membership renewal in the 2025 to 2026 year.

  3. The following day, 9 April 2025, DSA’s Chief Executive Office, Mr Geoff Mulham telephoned Ms Badman. They had this conversation:

“Mr Mulham:   Hi Joanne. Sorry for the delay in calling you back. I am about to send you an official communication. DSA is not renewing Enagic’s membership.

[Ms Badman]:   Enagic has been a member of the DSA for a long time. Why is the DSA not renewing our membership now?

Mr Mulham:   The official communication that I am sending will outline the basis on which the DSA is not renewing Enagic’s membership.”

  1. On 11 April 2025, Mr Mulham sent that email to Ms Badman. Mr Mulham referred to his conversation with Ms Badman on 9 April 2025 and continued:

“Under the current DSA Constitution dated 4 July 2024, membership of DSA is at our absolute discretion (clause 3.1(a)).

The criteria for Enagic to remain a Member included that:

… the person [Enagic] is not associated with other persons (whether or not a Member) who promote, encourage or incites non-compliance with this Constitution, the Code or any policy, standard or condition the Board may determined ... (clause 2.3(f)).” (Emphasis in original.)

  1. Mr Mulham then referred to the June 2024 ABC investigation and continued:

“[T]he continued position of [two named people] and others as distributors of Enagic is inconsistent with DSA membership renewal in circumstances where their businesses … are alleged to be acting contrary to the DSA Constitution and Code of Practice through, for example, repeated income claims and adverse publicity such as the ABC investigation”.

  1. Mr Mulham concluded:

“We will amend the DSA Register of Members … to confirm the end date of Enagic’s membership as 31 March 2025.”

  1. Solicitors’ correspondence ensued.

  2. On 7 May 2025, DSA’s solicitors disclosed to Enagic, for the first time, the fact of the 20 December 2024 “circulating resolution”.

Did Enagic “simply fail to renew its membership”?

  1. DSA’s primary position was that Enagic had failed to renew its membership beyond 31 March 2025, and that this was the end of the matter.

  2. Thus, I had this exchange with Ms King:

“The defendant’s contention is that the plaintiff simply failed to renew their membership and that is why the membership expired, in effect, at the end of March, and prior to that failure to renew there was undoubtedly a decision of the board not to offer the plaintiff a renewal of membership. But the plaintiff is seeking to interpret the constitution as though they didn’t in fact fail to renew their membership, but the evidence, and it is in Ms Badman’s evidence and our evidence, is that there was no attempt by the plaintiff to renew their membership and that they seemed to have been taken by surprise when they found out that they were no longer a member.

So the actual legal effect of what has happened here is not that there was a decision to terminate the membership of the plaintiff. The decision of the board when they made their resolution was not to offer the plaintiff a renewal and then the plaintiff did not in fact renew their membership.

HIS HONOUR: If that is in fact right, then the constitutional question does not arise.

KING: That is exactly my point your Honour.”

  1. Clause 3.1 provides, relevantly:

“The Board may admit in its absolute discretion a person or organisation as a Member upon application by that person or organisation in accordance with any procedure, for or other requirement specified in the Regulations”.

  1. Clause 3.3 provides that a person or organisation “automatically ceases to be a Member” if, relevantly, the person or organisation “does not renew membership by the due date”.

  2. However, my attention was not drawn to any provision in the Constitution that regulates the process by which a member of DSA must renew their membership.

  3. There may be a provision in the Regulations dealing with this but, if that is so, my attention was not drawn to it.

  4. I have set out Ms Badman’s account of the practice that has been followed concerning renewal of Enagic’s membership. It may be that the reason DSA did not, this year, send Enagic the Annual Membership Survey of which Ms Badman spoke was because the Board had already resolved that Enagic’s membership not be renewed. Why Enagic did not follow the matter up was not explored before me. Determination of the consequences of these matters would require a wider ranging enquiry than was conducted before me and not a matter about which I can form any opinion.

  5. In those circumstances, it is, in my opinion, necessary for me to consider the “constitutional question”.

Principles concerning the construction of the company’s constitution

  1. Company constitutions are generally interpreted in accordance with the principles that apply to commercial contracts, although regard must be had to the special characteristics of a company constitution. [4]

    4. Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144 at [56]-[63] (Weinberg J), [123]-[124] (Kenny J), [232]-[234] (Lander J); HNA Irish Nominee Ltd v Kinghorn [2010] FCAFC 57 at [42].

  2. Further:

“In particular, company constitutions have a public element to them. They are commonly relied upon by third parties, including potential members of the company. As a result … a court will ordinarily place greater weight on the meaning conveyed by the constitution on its face”. [5]

5. P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters) at [29.410].

  1. A court, in interpreting a provision of a commercial contract, has regard to its words, its context, and the purpose of the document as a whole. The leading modern statement on the importance of context and purpose is found in the reasons of French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd: [6]

“The rights and liabilities of parties under a provision of a contract are determined objectively, [7] by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. [8]

…

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. [9]

However, sometimes, recourse to events, circumstances and things external to the contract is necessary.”

6. (2015) 256 CLR 104 at 116-117; [2015] HCA 37 at [46], [48]-[49].

7. Citing Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640 at 656; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ).

8. Citing Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 350, 352 (Mason J); [1982] HCA 24; Reardon Smith Line Ltd v Hansen-Tangen; Hansen-Tangen v Sanko Steamship Co [1976] 1 WLR 989 at 995; [1976] 3 All ER 570 at 574 (Lord Wilberforce).

9. Citing Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) at 352 (Mason J).

  1. The question is what a reasonable business person in the position of the parties would have understood the relevant terms to mean; an objective task involving identification of the imputed intention of the parties by reference to the contractual text, construed in the light of its context and purpose. [10]

    10. Miles v Luneburger Franchising Pty Ltd [2021] NSWCA 248 at [32] (Gleeson JA, Macfarlan JA and Simpson AJA agreeing), citing Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (supra) at [35] (French CJ, Hayne, Crennan and Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (supra) at [46]-[51], [108]-[109] (French CJ, Nettle and Gordon JJ); Victoria v Tatts Group Ltd [2016] HCA 5 at [51]-[75] (French CJ, Kiefel, Bell, Keane and Gordon JJ); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16] (Kiefel, Bell and Gordon JJ); Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [18] (French CJ).

  2. Further, as has also been correctly stated: [11]

“… the only relevant meaning is that which the text conveys. This follows from the need to ascertain the intention expressed in the document. Although ... context and purpose are relevant, ultimately the court must attribute meaning to the words actually used.” (Emphasis in original.)

11. P Herzfeld and T Prince (supra) at [19.60].

  1. Neither party suggested that regard should be had to surrounding circumstances when construing the Constitution.

The relevant provisions of the Constitution

  1. As I have said, DSA’s position is that the Board was empowered by cl 2.3(f) of the Constitution to decide not to renew Enagic’s membership of DSA.

  2. Before turning to cl 2.3(f), I turn to cl 2.2 of the Constitution that provides:

“2.2   Classes of Members and eligibility

The Company’s Members comprise the classes of Voting, Provisional and Non-voting Members. The eligibility and rights are set out in the table below and such other non-voting categories whose rights, benefits, privileges, entitlements, obligations, liabilities, eligibility and status will be determined by the Board.

Class

Eligibility

Rights (see also clause 2.5)

Voting Member

A Direct Selling Organisation (see also clause 2.3 and clause 2.4)

Voting

Authorised representative may nominate for and be elected to Board of Directions

Provisional Member

A Direct Selling Organisation (see also clause 2.4)

Non-voting

Non-voting Member

Supplier Member: A person who conducts a business of supplying Products to Members.

Non-voting

Life Member: A natural person who has given outstanding service to Direct Selling and the Company, as determined by the Bord in its absolute discretion.

Non-voting

Life Members will also be conferred such additional rights (other than voting rights) as are determined by the Board.” (Emphasis in original.)

  1. The second sentence of cl 2.2 refers to the “eligibility and rights” of members as set out in the following table. In that context “eligibility” must refer to the general nature of entities that are eligible to become members, as set out in the table; that is, either a Direct Selling Organisation, a Supply Member, or a Life Member. I do not read this clause as dealing with the eligibility of particular members. The meaning of the second sentence of cl 2.2 is not obvious save that the subject of the Board’s “determination” there referred to is as to the general nature of the “rights, benefits, privileges, entitlements, obligations, liabilities, eligibility and status” of members, not the “rights, benefits, privileges, entitlements, obligations, liabilities, eligibility and status” of particular members.

  2. The question of the eligibility requirements for particular members is dealt with in cl 2.3:

“2.3   Eligibility requirements for Members

In addition to the requirements set out in clause 2.2, a person is eligible to become and remain (as the case may be) a Member if:

(a)   the Board in its opinion considers that the person is a Fit and Proper person;

(b) the Board in its opinion considers that the Member and its representative will comply with the requirements in this Constitution, the Code and any other policy, standard or condition the Board may determine;

(c)   the person undertakes to comply with, and actually complies with (as the case may be), the requirements of this Constitution;

(d)   the person undertakes to be bound by, and actually complies with (as the case may be), the Code;

(e)    the person undertakes to comply with, and actually complies with (as the case may be), any policy, standard or condition the Board may determine;

(f)   the person is not associated with other persons (whether or not a Member) who promote, encourage or incites non-compliance with this Constitution, the Code or any policy, standard or condition the Board may determine;

(g)   where the person is a body corporate – the Board in its opinion considers that the person’s representative is a Fit and Proper person and the person ensures that clauses 2.3(b) to 2.3(e) are complied with by the representative as if he or she was a Member.” (Emphasis added.)

  1. As can be seen, in the chapeau to cl 2.3, it is stated that what follows is “in addition to the requirements set out in clause 2.2”; that is the “eligibility” requirements summarised in the table to cl 2.2.

  2. Clause 2.2 is directed to the eligibility of particular “persons” falling within one or other of those general categories of eligibility: being a Direct Selling Organisation, a Supply Member, or a Life Member.

  3. Three of the circumstances in which “a person is eligible to become and remain” a member depend upon the Board forming a particular opinion: see cll 2.3(a), (b) and (g). It is thus a “requirement” for eligibility that the Board form that opinion.

  4. The other four requirements for eligibility require that the person, as a matter of fact, and not merely in the Board’s opinion:

  1. undertakes to comply with and be bound by the Constitution, the Code and the Board Policies: cll 2.3(c), (d) and (e); and

  2. be “not associated” with persons who encourage or incite non-compliance with the Constitution, the Code or the Board Policies: cl 2.3(f).

  1. Clause 2.3 is silent as to how a member is to be dealt with if a circumstance arises that renders them no longer eligible to be a member.

  2. As I have said, cl 3.1 of the Constitution provides that the Board has an “absolute discretion” as to who is to be admitted as a member. [12]

    12. See [35] above.

  3. Although Mr Mulham referred to this clause in his 11 April 2025 email, [13] I do not see it as being dispositive here as it deals only with the admission of a person as a member; not with whether a member is eligible to become and remain a member.

    13. See [28] above.

  4. Clause 3.3, to which I have referred, [14] also provides that a person “automatically ceases to be a Member” if the person “ceases to be eligible to be a Member”. [15]

    14. See [36] above.

    15. Clause 3.3(a)(1).

  5. A person ceases to be eligible to be a member once any one of the matters in cl 2.3 is engaged.

  6. But what is to be done in that event?

  7. Clause 3.4 is critical and provides:

“3.4   Disciplining Members

(a)   (Sanctionable Conduct) In this clause 3.4(a), ‘Sanctionable Conduct’ means conduct of a Member or its representative which:

(1)   is, has been or will be prejudicial to the Company or the Direct Selling channel;

(2)   is not that of a Fit and Proper person;

(3)   does not comply with a policy, standard or condition determined by the Board, including, but not limited to, not complying with the obligation to pay Member fees, levies or other money owed to the Company within a time allowed by the Board;

(4)   is unbecoming of Members;

(5)   adversely impacts the Direct Selling channel or adversely affects self-regulation of the Direct Selling channel;

(6) constitutes a refusal or neglect to comply with the provisions of the Constitution, the Code or the Regulations;

(7)   is conduct for which the Member has been found guilty by a court of an indictable offence; or

(8)   is conduct similar to the above which is set out in the Regulations.” (Emphasis in original.)

  1. The categories of Sanctionable Conduct specified in cl 3.4(a) include three that correspond, exactly, to the requirements for eligibility specified in cl 2.3.

  2. Thus:

  1. cl 3.4(a)(2), which prescribes conduct that is “not that of a Fit and Proper person” as being Sanctionable Conduct, corresponds with cl 2.3(a);

  2. cl 3.4(a)(3), which prescribes non-compliance with Board Policies as being Sanctionable Conduct, corresponds with cl 2.3(e); and

  3. cl 3.4(a)(6), which prescribes a refusal or neglect to comply with the Constitution or the Code as Sanctionable Conduct, corresponds with cl 2.3(c)(d), and also, less directly, with cl 2.3(b) and (g).

  1. Clause 3.4 does not, in terms, prescribe the conduct referred to in cl 2.3(f), being associated with a person who promotes, encourages, or incites non-compliance with the Constitution, the Code, or Board Policies as Sanctionable Conduct. But cl 3.4(a)(3) does prescribe actual non-compliance with the Constitution, the Code and Board Policies as Sanctionable Conduct.

  2. Further, the conduct referred to in cl 2.3(f) would inevitably constitute Sanctionable Conduct: that is, conduct prejudicial to DSA, [16] conduct not that of a Fit and Proper person, [17] and conduct unbecoming of members. [18]

    16. Clause 3.4(a)(1).

    17. Clause 3.4(a)(2).

    18. Clause 3.4(a)(4).

  3. Clause 3.4 then sets out an elaborate procedure to be followed in any case of alleged Sanctionable Conduct. I attach a copy of cll 3.4(b)-(k). Clauses 3.4(b) to (k) (83.1 KB, pdf)

  4. In summary:

  1. first, the Chief Executive Office of DSA “may” investigate a complaint or concern regarding a member on his or own motion or on receipt of a complaint from a consumer; [19]

    19. Clause 3.4(b).

  2. if the Chief Executive Office forms the view that the Member may have engaged in Sanctionable Conduct, the Chief Executive Officer “must” prepare a “Disciplinary Notice” or issue an informal letter to the Member outlining issues of concern and “must” recommend whether the Board should proceed to take further steps; [20]

    20. Clause 3.4(c).

  3. the Board then “must” consider the Chief Executive Officer’s recommendation and either issue a Disciplinary Notice, issue an informal letter, request further investigations, or take no further action; [21]

  4. if the Board issues a Disciplinary Notice it “must” convene a “disciplinary tribunal”; [22]

  5. if that occurs, the disciplinary tribunal “must” convene expeditiously, make such order as it considers appropriate and give written reasons for its decision; [23]

  6. in doing so the tribunal “must” afford the Member “procedural fairness and the right to be legally represented”, and allow the member a reasonable opportunity to make submissions; [24] and

  7. the tribunal can impose a sanction including a caution, a fine, suspension of membership, or termination of the Member’s membership of the company. [25]

    21. Clause 3.4(d).

    22. Clause 3.4(d).

    23. Clause 3.4(f).

    24. Clause 3.4(g).

    25. Clause 3.4(h).

  1. The Constitution thus specifies a detailed process for dealing with a Member accused of Sanctionable Conduct. That process includes a right to be heard, a right to be represented, a right to have written reasons and an entitlement generally to procedural fairness.

  2. Nonetheless, Ms King submitted that there were “two alternative pathways here” and that if the Board concluded in relation to a particular member that cl 2.3(f) was engaged it could, of its own motion, without notice to the member, and without giving the member a chance to be heard, determine that membership not be renewed; and thus bypass the elaborate procedures set forth in cl 3.4.

  3. I had this exchange with Ms King:

“HIS HONOUR: What is the point of having 3.4 then? Why would the parties to the constitution have the detailed provision of 3.4 if it never had to be followed?

KING: It is a choice that is available to the defendant and one can easily think of situations where an organisation such as the defendant might choose to follow the clause 3.4 process because it considers that such a process might have more persuasive force for the benefit of its constituency. But 3.4 is not the only pathway available to the defendant.”

  1. I do not accept that, on the proper construction of the Constitution, this is its effect.

  2. Ms King did not point to any words in the Constitution that compelled acceptance of her posited construction.

  3. And I think that reasonable persons in the position of the original subscribers to the Constitution would not have understood the Constitution to have this effect.

  4. The Constitution contains specific and detailed provisions dealing with what is to be done in relation to a member who is said to have engaged in conduct that calls into question their continued eligibility as a member of DSA.

  5. The general rule is that “where a contract contains general provisions and specific provisions, the specific provisions will be given greater weight than the general provisions where the facts to which the contract is to be applied fall within the scope of the specific provisions”. [26]    

    26. See K Lewison and D Hughes, The Interpretation of Contracts in Australia (2nd ed, 2025, Thomson Reuters) at [7.05] and the authorities referred to therein; see also P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters) at 24.40.

  6. Here, there are general provisions in cl 2.3 specifying the eligibility requirements of members, but which make no provision for the consequences of ineligibility. On the other hand, there are specific provisions in cl 3.4 spelling out those consequences. Those specific provisions must prevail.

  7. The matter can be tested this way.

  8. Had the Board concluded that Enagic was not a “Fit and Proper person”, and thus by reason of cl 2.3(a) no longer eligible to remain a member of DSA, cl 3.4 constitutes a specific provision obviously intended to set out how such matter was to be dealt with. [27] It would be extraordinary if the Board could simply ignore that specific provision and arrogate to itself the power summarily to determine the mater.

    27. That is, cl 3.4(a)(2).

  9. Similarly, had the Board concluded that Enagic had failed to comply with the Constitution, the Code or Board Policies, and thus by reason of cll 2.3(c)-(e) no longer eligible to remain a member of DSA, cl 3.4 contains specific provisions addressing that very question. [28]

    28. That is, cll 3.4(a)(3), (6).

  10. I cannot see how the position could be different where, as here, Enagic is not accused of actually failing to comply with the Constitution, the Code or a Board Policy, but is, allegedly, associating with persons who promote, encourage, or incite non-compliance with the Constitution, Code, and Board Policies; especially where such conduct would inevitably itself be Sanctionable Conduct of one kind or another.

  11. A fair reading of the Constitution shows that cll 2.3 and 3.4 constitute two sides of the same coin. Clause 2.3 deals with the requirements for eligibility and cl 3.4 deals with the consequences of ceasing to or failing to satisfy those requirements.

  12. This reading of the Constitution has the effect that if the Board forms the opinion that a member is no longer eligible to remain a member, that member will be given notice of the matters of concern, have a right to be heard, be afforded procedural fairness and be given reasons for any decision adversely affecting its position.

  13. The Board was not itself entitled to determine these matters.

Conclusion

  1. I propose to make a declaration to the effect that, on the proper construction of the Constitution, the board was not itself entitled to determine that Enagic not be offered renewal of its membership of DSA.

  2. I will invite submissions as to the precise form of the declaration.

  3. Enagic also seeks orders that DSA:

  1. notify it of all fees payable by it, including its annual subscription for the membership year 1 April 2025 to 31 March 2026;

  2. advise it how payment for its annual subscription is to be paid for that membership year; and

  3. process the renewal of its membership in accordance with the Constitution.

  1. I am not inclined to make these orders but will invite further submissions on the topic.

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Endnotes

Amendments

23 May 2025 - Coversheet - Parties' legal representatives corrected.

Decision last updated: 23 May 2025

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