Gregor v British-Israel-World Federation - [2002] NSWSC 12

No judgment structure available for this case.

Reported Decision:
41 ACSR 641

New South Wales

Supreme Court

CITATION: Gregor v British-Israel-World Federation [2002] NSWSC 12

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 1630/01

HEARING DATE(S): 16, 17 & 18 October 2001

JUDGMENT DATE: 29 April 2002

PARTIES :

Leon Gregor and Trevor Baker (P)
British-Israel-World Federation New South Wales Branch (D)

JUDGMENT OF: Austin J

COUNSEL : P J Kelso (Solicitor) (P)
J Boyle (Solicitor) (D)

SOLICITORS: Taylor Kelso (P)
Boyle Associates (D)

CATCHWORDS: CORPORATIONS - winding-up - just and equitable ground - competing claims for entitlement to manage corporation - break down of personal relations - surplus assets on winding-up pass to UK body, which will apply them to a new entity - winding-up order made

LEGISLATION CITED: Corporations Act 2001 (Cth) ss 248A, 248D, 461, 462, 467, 1322

CASES CITED: Baird v Lees 1924 SC 83
Belgiorno-Zegna v Exben Pty Ltd (2000) 35 ACSR 305
International Hospitality Concepts v National Marketing Concepts (No 2) (1994) 13 ACSR 369
Loch v John Blackwood Ltd [1924] AC 783
Mitropoulos v Greek Orthodox Church (1993) 10 ACSR 134
Re Kurilpa Protestant Hall Ltd [1946] St R Qld 170
Re-Westbourne Galleries Ltd [1973] AC 360

DECISION: Winding-up order made

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

MONDAY 29 APRIL 2002

1630/01 LEON GREGOR AND TREVOR BAKER V BRITISH-ISRAEL-WORLD FEDERATION

JUDGMENT

HIS HONOUR:

The proceedings

1 These proceedings were commenced on 2 March 2001. The plaintiffs, who claim to be members and contributories of the defendant, seek an order for the winding up of the defendant on the "just and equitable" ground (Corporations Act, 2001 (Cth), s 461 (1) (k)). The defendant is currently under the de facto control of Mr David Palmer and Mr Max Tabone and their supporters, although the validity of the steps leading to that outcome is challenged by the plaintiffs. Essentially, the proceedings reflect a bitter and intense dispute between two factions who are vying for control of the defendant company and its assets. I shall refer to the factions as the Gregor group and the Palmer group.

2 I have found the case difficult to resolve, mainly because the evidence on both sides, but particularly from the Palmer group, has presented an incomplete picture of the salient events. Affidavit evidence was supplemented by oral evidence rather more extensively than is usual in cases in this Division of the Court. Even so, there were some gaps in the evidence - for example, the newsletters and cartoons which so inflamed the Palmer group that it took steps to expel the Gregor group from the Board and from membership had not been put in evidence, and there is no direct evidence of the content of the information laid before the President of the "headquarters" organisation which led to the decision to disaffiliate the defendant. The defendant's solicitor strongly objected to some of the plaintiff's evidence, and the plaintiffs' solicitor responded by electing not to read substantial parts of the annexures to affidavits of the plaintiffs' witnesses. I have endeavoured nevertheless (somewhat painstakingly) to piece together an account of the principal stages of the dispute.

3 I shall begin by dealing with the evidence concerning the beliefs of the British-Israel movement, the constitution of the defendant, and the defendant's relationship with the "headquarters" organisation. A threshold issue is whether the plaintiffs have standing to bring the proceedings, and I shall deal with that question before turning to the facts of the dispute. The dispute comes to Court largely because the defendant is the beneficiary of property worth over half $1 million under the will of Mr K D Nichols, who died in 1997, and I shall therefore deal with the terms of his will and some controversy surrounding it. The present troubles of the defendant began in 1999 when Mr Palmer became a director and member and Mr Gregor defeated Mr Tabone in an election for the Presidency. I shall start my narration the facts at that point, and deal in detail with the Board meetings of 26 March and 16 April 2000, when irreconcilable differences emerged between the Gregor group and the Palmer group, and with the meetings held on 4 and 18 June 2000, when Mr Gregor and others of his group were purportedly removed from the Board and expelled from membership. Steps subsequently taken have included the freezing of bank accounts, the purported convening of an annual general meeting, the distribution of inflammatory letters and circulars and the commencement of the present proceedings.

4 For the reasons I shall give, my opinion is that there is no practical alternative to the winding up of the defendant company.

The British-Israel movement

5 The British-Israel movement is a group of organisations, existing mainly in the British Commonwealth and North America. Although the various branches of the movement exhibit some differences of style and emphasis, the members of the movement generally believe that the lost ten tribes of the northern house of Israel's descendants are to be found in the Anglo-Saxon-Celtic and kindred peoples of today. They profess to be Christians who insist that they believe in the whole Bible, and they hold that the British nation plays an important part in God's plan. The Federation was fairly prominent, and had a large membership, during World Wars I and II, but the number of members has declined since that time.

6 Since the central teachings of the movement relate to the claim that the British peoples are descended from the lost ten tribes, there seems ex facie to be a racial element to the movement's beliefs. But evidence before me as to the beliefs of the movement does not establish that it is a "white supremacist" racist movement. An article by Douglas C Nesbit which is on the BIWF website speculates that the inhabitants of various nations including the Dutch and the Danes may be descendants of certain tribes of Israel, and refers to the "faint possibility" that certain Asian peoples may in some measure be "racially related stock" (mention being made of Brahmins, Sikhs and Afghans).

7 In this case there are allegations and counter-allegations that people having Nazi leanings or affiliations have been attracted to the movement's branch in Sydney. It is unnecessary for me to determine the truth or falsity of these allegations, and I shall be careful not to do so. However, it is important to consider the allegations made against the individuals who have been vying for control of the defendant, because the case for winding up, in the end a strong one, flows from the ideological divisions reflected in the allegations and the personal animosity thereby engendered. When recording the allegations, I shall do what I can, within reason, to protect reputations, including in particular the reputations of those who were not before the Court at the hearing.

8 The headquarters of the Federation are in London. The British body is called the British-Israel-World Federation ("BIWF"). It is managed by a board of management comprising the President, two Vice-Presidents and other directors. The board meets every second month, and between its meetings an executive committee comprising the President and the two Vice-Presidents has executive authority. One of the functions of the BIWF is to recognise branches in other countries as affiliates, and to issue certificates accordingly.

9 A branch of the Federation has existed in New South Wales for many years. Before November 1929 there was an unincorporated body called the British-Israel-World Federation - Sydney Branch, sometimes called alternatively the British-Israel-World Federation - New South Wales Branch. In November 1929 the defendant company was formed to take over the assets and liabilities of that body. The defendant is a company limited by guarantee formed under the companies legislation of New South Wales, licensed as a non-profit company to dispense with the word "Limited" from its title.

10 The defendant is the lessee of premises in York Street, Sydney, holding over on a monthly basis. The premises comprise a large room used as a reading room and for meetings. The room contains many books, some quite old and rare, which according to the evidence have a value of about $21,000. The company sells books and other literature to its members and other interested customers, and it publishes a magazine called "The Kingdom Herald". Its income is derived from membership fees, sales of publications and donations. It is prohibited by its constitution from distributing its income or property to members. Generally speaking, the income is modest, but the company's financial profile has been transformed by the gift from the Nichols estate.

The relationship between the defendant and the BIWF

11 By a certificate dated 1 October 1939, the BIWF certified that "B.I.W.F. (New South Wales Branch) is recognised by and in affiliation with the British-Israel World Federation".

12 The defendant is not a subsidiary of the BIWF (notwithstanding that it is described as a "branch" in its name, with authority under its constitution to form "sub-branches"). In fact its formal, legal ties to that body under its constitution are limited. Clause 3 (i) of the company's memorandum of association states as one of its objects "in furtherance of the objects of the Company, to co-operate with" the BIWF, and clause 6 (which I shall describe in more detail) gives the BIWF some rights with respect to the surplus assets of the company upon winding up. It is plain from the defendant's constitution that the defendant is an autonomous entity, legally at liberty to manage its affairs independently of the headquarters body. Clause 3 (i) in the statement of objects probably does not impose on the defendant any legal duty to co-operate with the BIWF at all times.

13 The certificate issued by the BIWF states that the defendant is "recognised by and in affiliation with" it. There was some speculation in argument that the "affiliation" might amount to some form of licensing of intellectual property, if only in the limited sense of protecting the defendant from liability for passing off or misleading conduct through the use of the name and logo (if any) of the Federation. However, it is unnecessary for me to make any determination on that point, and the evidence does not permit me to do so.

The defendant's constitution

14 Clause 3 of the memorandum of association is a statement of the objects of the company, which does not refer to the BIWF except in clause 3 (i), discussed above.

15 Clause 4 of the memorandum of association provides that each member of the company is liable to contribute one pound upon the winding up of the company.

16 Clause 6 of the memorandum of association provides that if there are surplus assets upon the winding up of company, the assets are either to be transferred to the jurisdiction of the BIWF, or (if so determined by the votes of not less than three-fifths of the members of company present in person at a meeting called for the purpose at or before the time of dissolution) to some other institution or institutions having objects similar to those of the company, selected by the members' vote or in default thereof, by this Court, and if effect cannot be given to this provision, then to some charitable object. Thus, unless the members resolve otherwise, the surplus assets on winding up go to the BIWF. The evidence indicates that if it were to receive those assets, the BIWF would regard itself as a custodian or trustee with the responsibility to see that an appropriate new body was formed to pursue the Federation's objects in New South Wales, and then to transfer the assets to that new body.

17 Clause 7 of the memorandum of association deals with amendment of the memorandum and articles of association. It provides that amendments require the approval of the Governor in Council..

18 Article 7 of the defendant's articles of association states that any British Subject or other duly approved National is eligible to apply for membership, provided he is considered by the directors in their sole discretion to have Christian principles. The article envisages an application and then a decision by the directors to admit the applicant to membership, or not to do so. The applicant must tender the current membership fee and produced two or more references, if required by the directors.

19 A member is entitled to vote at meetings of members, and each member has one vote (article 32). Any financial member is qualified to be a member of the Board of Management or an officer of the company (article 35).

20 By article 34, Board of Management comprises a President, as many Vice-Presidents as may be elected (not exceeding six), one or two Honorary Secretaries, and not more than 12 other directors. A quorum of directors is five. Article 36 provides that the office of a director shall be vacated upon the happening of certain events, including "if without permission of the Board he absent himself from three successive Board or Committee Meetings properly notified". Article 37 provides that if a member of the Board becomes disqualified under article 36, his seat shall be declared vacant by the Board at the next regular meeting. By article 38, the remaining directors may make an appointment to the Board to fill a casual vacancy.

21 Article 39 empowers the Board of Management to manage the affairs of the company, but it allows for regulations of the company in general meeting, saying that they do not invalidate prior acts of the directors.

22 Article 48 provides that the company in general meeting may by a resolution passed by two-thirds at least of the votes of members personally present, remove any director before the expiration of his office. However, since the defendant is a public company for the purposes of the Corporations Act, s 203D applies and the members may remove a director by ordinary resolution provided that the procedure set out in that section is followed.

23 Article 49 provides for the directors to meet together for the dispatch of business. Article 49 deals with the convening of meetings of directors. It allows the President to do so. There are no specific provisions about giving notice to directors.

24 Article 57 sets the membership fee and empowers the directors to vary it, although the members in general meeting may disallow the variation. There was conflicting evidence as to the current membership fee, which appears to be either $5 or $2. Under article 58, membership fees are payable within the first month of the company's financial year. A member more than one month in arrears is deemed to be unfinancial and is not entitled to vote (see also article 33), and the member's name may be struck off the books if he continues to be unfinancial for a consecutive period of three months.

25 Article 59 deals with the expulsion of members. It empowers the directors to expel, suspend or otherwise punish a member if any of the following is proved to their satisfaction:

· the member divulges the proceedings of any meeting so as to cause disturbance or to reflect improperly on the decisions of the directors so as to bring the same into contempt;

· the member makes known any private business of the company to persons other than members entitled thereto;

· the member damages, destroys, or takes away any property belonging to the company without proper authority; or

· the member is guilty of fraud.

· This is subject to the proviso that the member shall have first been given notice of the charge laid against him and the opportunity of being heard in his own defence.

26 Article 62 is a dispute resolution provision. It states that "in case of any dispute between any member and the Company or between any officer of the Company and any members", the directors are to consider and decide on the dispute, and their decision is binding and conclusive on all parties without appeal. There are some procedural safeguards, which oblige the directors to hear the parties and consider any evidence which may be brought forward on either side. The article does not require the directors to conduct a hearing but they may do so, at a special meeting or inquiry.

The “Conditions of Membership” brochure

27 The evidence includes a brochure entitled "Conditions of Membership". The document is undated and there is no attribution of authorship. There is no evidence of any minute of a meeting of the members in general meeting or of the Board of Management adopting the contents of the document. There is nothing to indicate that it is a regulation for the purposes of article 39. According to the evidence of Mr Palmer, who has been a director since 1999, all members are given a copy of the brochure. According to the evidence of Mr Gregor, who has been a director since April 1999, the brochure first came to be used in about September 1999. Mr Gregor says that the document was produced by Mr Tabone, at a meeting of the Board of Management.

28 The purpose of the brochure is said to be to set out information about membership of the company, and applicants for membership are requested to study it carefully before submitting an application. The brochure summarises various provisions of the company's constitution, including the expulsion article, and sets out a statement of beliefs.

29 The brochure also states that the company has four types of membership. Active members have full rights including the rise to vote and propose motions at general meetings. Active membership includes financial members of the company who have given a written confirmation of the acceptance of the conditions of membership set out in the brochure, and financial members of other State branches and accredited organisations. Associate members enjoy the same responsibilities, rights and privileges as active members, except that they are not entitled to vote or propose motions at general meetings. Applicants for membership are first admitted as associate members, but after 12 months they may apply to be transferred to the active members roll. An honorary member enjoys all the rights, privileges and responsibilities of an associate member, except that he is exempt from the payment of annual subscription fees. A life member enjoys all of the rights and privileges of an active member, except that he is exempt from payment of the annual subscription fees. Life membership is extended as an honour in appreciation for long and outstanding service. Life members are entitled to attend board meetings.

30 In a section of the brochure headed "Obligations of Members”, it is said that members are expected to give their full support and allegiance to the aims of the Federation, and to use every opportunity available to them of spreading the Gospel of God's Kingdom as expounded by the Federation. Reference is made to the "many and varied ideas which are being expounded by numerous groups and individuals", which do not conform to the Federation's Statement of Beliefs nor proper Christian doctrine, and it is said that all members are required to use the utmost care at all times to preserve the truth of God's Word. Members are exhorted to consider tithing or other financial support. It is said that members are expected to attend meetings and distribute literature, but the distribution of literature not published or approved by the Federation is not permitted in circumstances where the impression would be created that the literature is authorised by the Federation.

31 The contents of the brochure, if valid and effective, would amount to a substantial addendum to and qualification of the constitution of the company. In particular, the provisions of the brochure about four kinds of membership with differential rights are not matched by anything in the constitution. In my opinion, those provisions are inconsistent with the constitution, particularly article 7 (which lays down simple requirements for membership without any reference to separate classes and without any provision authorising the recognition of members of other British-Israel bodies), and articles 21, 31, 32 and 58 (which give any financial member the right to vote at a meeting of the company).

32 To the extent that the conditions of membership contained in the brochure are inconsistent with the defendant's constitution, they can be of no legal effect. Other provisions of the brochure may have some legal effect if it can be shown that they are the subject matter of an informal agreement amongst the members. There is no such evidence before me now, and in any case many of the provisions of the brochure (including many of the paragraphs under the heading “Obligations of Members") appear to be too broadly and imprecisely expressed to be enforceable as a contract. For the purposes of the present proceedings, therefore, the correct course is to treat the brochure as having no legal effect.

The plaintiffs’ standing

33 One of the grounds of defence in the present proceedings is that the plaintiffs, Mr Gregor and Mr Trevor Baker, do not have standing to bring the proceedings. Section 462 (2) of the Corporations Act provides (to the extent relevant) that a contributory may apply for an order to wind up a company on the just and equitable ground. Section 462 (5) says that except as permitted by the section, a person is not entitled to apply for an order to wind up a company.

34 "Contributory" is defined in s 9 to mean (to the extent relevant) a person liable as a member or past member to contribute to the property of the company if it is wound up. As I have said, the memorandum of association of the defendant provides that its members are each liable to contribute one pound upon the winding up of the company. The combined effect of ss 515, 517 and 521 is that the liability to contribute is limited to one pound for each member and past member, and a past member need not contribute if he or she was not a member at any time during the year ending on the day of commencement of the winding up. The day of commencement of the winding up is the day when an order for winding up is made: s 513A (e).

35 The basis for contending that Mr Gregor is not a contributory is that he was, according to the defendant, validly expelled from membership on 18 June 2000. The short answer to that submission is that the purported expulsion of Mr Gregor was invalid and ineffective, for the reasons I shall give. He therefore remains a member and a contributory and has standing to bring the present proceedings.

36 The basis for contending that Mr Trevor Baker (who is not related to Stanley Baker, the executor of the will of KD Nichols) is not a contributory is that Mr Palmer and Mr Tabone and their colleagues do not recognise him and can find no record of his membership. They say that Mr Baker is a puppet of Mr Gregor used to avoid any difficulty as to his own standing.

37 Mr Baker gave affidavit and oral evidence. I gained the impression from his evidence that he holds some deep religious convictions and has strong views about the Bible. In cross-examination he denied that he had become a plaintiff just because Mr Gregor and his colleagues had asked him to put his name to the proceedings. He said "They have asked me to be a part, because when good men do nothing, evil prevails, and it's as simple as that" (Transcript, page 106).

38 Mr Baker said that he joined the defendant in 1997 and has remained a member ever since. He said that in 1997 he wrote to Ms Voigt at the company for some books, and the books were sent to him with a membership form. He said he sent a donation and also some money for membership, and filled in and signed the membership form, and returned it to the York Street premises. He was not able to produce a copy of the membership form or the invoice or correspondence with Ms Voigt in 1997, but he produced documents relating to later contact with the defendant. He produced an invoice from the defendant to him dated 24 January 2000 for $86.60, for the purchase of literature from the bookroom. The invoice is endorsed with a note from Ms Voigt, who was Honorary Secretary at the time, telling him that his Kingdom Herald was paid to 2001 and membership was paid to 16 August 2000. He also produced a letter to him from Mr Macindoe (a member of the Gregor group) dated 30 November 2000 thanking him for a donation of $100, and a receipt dated 11 October 2000 for $125 "being for membership plus $100 donation".

39 Mr Baker said that he sent a letter to the Kingdom Herald, stating that he disagreed with an item in it. He received a reply from Mr Tabone, who was at that time the President of the defendant. He had correspondence with Mr Tabone for two years, from which he formed an unfavourable view of Mr Tabone. The correspondence is not in evidence, but the evidence includes a letter Mr Tabone wrote to Mr Baker on 2 January 2001 informing him that the annual general meeting would be held on 21 January 2001 and inviting him to fill in forms and return them. Mr Baker also received the notice dated 11 December 2000 of the annual general meeting to be held on 21 January 2001, together with a proxy form.

40 Mr Baker said that he lodged a proxy for the annual general meeting held in December 1999 (though he was not sure whether it was in November or December), and he subsequently discovered that Mr Palmer was involved in the management of the company. He then wrote to Mr Tabone saying that he no longer wished to correspond with him, while he had an affiliation with Mr Palmer, and for that reason he did not complete and return the proxy form for the meeting held on 21 January 2001.

41 I accept the evidence of Mr Baker. His evidence satisfies me that he was a member of the defendant from 1997 until at least 21 January 2001. Since the membership year appears to be the financial year from July to June, Mr Baker's payment in October 2000 would make him a financial member until at least 30 June 2001 if it was paid to a duly authorised recipient. The fact that Mr Baker's membership is not recorded in the Register of Members maintained by the defendant is not persuasive, since it appears that the register of members is less than completely reliable, as I shall explain.

The will of Mr Nichols

42 Kenneth Dudley Nichols died on 3 January 1997. He appointed Stanley Lawrence Baker as his executor, and gave his property at Lot 530 Pulpit Rock Road, Blackheath to the governing committee of the defendant. His will made the following direction and declaration with respect to this gift:

"I DIRECT that this gift shall be used for the benefit of the Federation it being my wish that the said property be retained for the purposes of the Federation and, in particular, to provide a venue for conducting educational and service programmes and courses AND I FURTHER DECLARE it is my wish that the said property not to be sold unless there be a unanimous decision of the governing body of the Federation but if the unanimous decision of the governing body cannot be obtained and at least a majority of the governing body are in favour of sale then it is my wish that a general meeting of members be called for the purpose and if two-thirds (2/3) of the general body of members attending the meeting in person or by proxy who vote shall be in favour of sale it is my wish that the property shall be sold".

43 After giving another property to named beneficiaries, the testator gave the residue of his property upon trust for the governing body or committee of the defendant "to be used firstly for or towards the maintenance and development of the property known as Lot 530 Pulpit Rock Road, Blackheath and secondly for the general purposes of the said Federation, it being my wish that the capital of my residuary estate be preserved for the maintenance and development of the said property".

44 One of the issues of controversy between the Gregor group and the Palmer group relates to the use of the residue of the Nichols estate. The executor of the estate made a distribution of $150,000 out of residue to the company in about August 1999. Ms OohnaVoigt, Secretary of the company, and a director of the time called Mr Salter took responsibility for depositing the money in a term deposit with Westpac Banking Corporation on 3 August 1999. However, $10,000 was deducted for expenditure related to the bookroom.

45 Mr Gregor gave evidence that Mr Palmer objected to the deposit of the estate funds in a term deposit account. Mr Gregor said that the money was deposited in the term account "to stop other people from misappropriating it" (Transcript, page 66). It seems from his evidence that Mr Gregor's concern was to prevent money received from the estate from being used for expenses related to the bookroom in York Street, as he believed that there was no justification for maintaining the bookroom in a city location. He referred to the bookroom as "a derelict business which does not need to be supported and can be conducted without cost elsewhere"(Transcript page 94), referring to the fact that Mr Macindoe had offered his home in Falconbridge without cost as a location for the books.

46 Mr Gregor saw it as contrary to the terms of Mr Nichols' will to use the estate's money to support the bookroom in York Street. Strictly this is not so, since the gift of residue allows the money to be applied for a primary and secondary purpose, the secondary purpose being use for the general purposes of the defendant. Thus, in circumstances of necessity (such as where funds are needed to pay for the costs of liquidation) the will would in my opinion permit funds to be made available. However, to the extent that any use of the estate's money to support the bookroom might consume any of the capital of the residuary estate as opposed to income from it, such a use would be contrary to the wishes of the testator expressed in the will, albeit in precatory language.

47 Mr Palmer gave evidence that he and his colleagues were suspicious of a conspiracy to defraud the company of the benefits of the Nichols estate. He also expressed his belief in the importance of maintaining a city bookroom. When asked whether he regarded the Board as entitled to use the distribution from the Nichols estate to pay rent on the bookroom, he said the majority of members indicated that they would agree to do so, and he said the Board would be entitled to use the money for this purpose because the very existence of the company would be at stake (Transcript, page 185).

48 During 1999 there were negotiations between the solicitors acting for the estate and for the defendant about the transfer of the Blackheath property to the company. Mr Gregor's evidence was that the two sides to those negotiations were "reasonably close" to an agreement. However, the property has not yet been transferred to the company, presumably because of the emerging split between the Gregor and Palmer groups.

The Board under the presidency of Mr Gregor

49 Mr Gregor became a member of the defendant in about 1994. He was invited to become a director to fill a casual vacancy in April 1999. He was elected as a director and elected President at the annual general meeting of the company held in December 1999. He defeated Mr Tabone for the presidency.

50 There is very little evidence about the annual general meeting. It appears that it was convened for October 1999 and either adjourned or reconvened for December. Mr Gregor says that 75 people were present in person or by proxy. Mr Gregor succeeded in his bid to become the President after 16 new members, mostly Korean, had been admitted to membership just prior to the meeting on his nomination. Other applications for membership, nominated by the Palmer group, were deferred. It was put to Mr Gregor in cross-examination that he would not have been elected but for the support of the new Korean members. He denied that this was so, and said he had the figures for the election, which would prove that he would have been elected even without the votes of the Korean members. He was not asked to give evidence of those figures.

51 Mr Palmer has objected to the circumstances in which Mr Gregor was elected, but he also gave evidence that after the annual general meeting of 1999 there was clearly an existing and duly elected Board to which Mr Gregor had been elected. In cross-examination he acknowledged (Transcript, page 124) that Mr Gregor, Mr Franks and Mr Macindoe (the latter to being part of the Gregor group) were directors after December 1999. On the existing state of the evidence, there is no basis for challenging the validity of Mr Gregor's election.

52 Mr Palmer became a member of the defendant in about November 1999, and he was elected to the board at the 1999 annual general meeting.

53 When Mr Gregor became President and Mr Palmer became a director there were important issues confronting the company. In particular, the company's revenue (excluding the gift from the Nichols estate, which Mr Gregor did not regard as available to defray operating expenses) did not appear to Mr Gregor to be sufficient to pay the rent on its city premises, and he formed the view that the bookshop should be moved out of the city. Mr Palmer disagreed. Nevertheless, at first Mr Gregor and Mr Palmer were able to work co-operatively, partly because they were both opposed to Ms Voigt and her supporters. As I have said, Ms Voigt had clashed with Mr Palmer over the opening of the term deposit for the distribution from the Nichols estate, and with her supporters she had endeavoured to remove Mr Palmer from the Board of Management.

54 Early in January 2000 a committee of the Board embarked on a procedure which led them to issue a notice to Mr Palmer purportedly expelling him from the Board and from membership of the defendant. The notice was signed by a number of people who were directors of the time, and by Ms Voigt and Christine Deck, who were the Secretaries. It appears that Mr Gregor denied that the committee was authorised to act. Mr Palmer gave evidence that he appeared before the committee, contending that he did not recognise the validity of the proceedings of the committee. Although the committee purported to expel him, he said that later the committee "went away" (Transcript, page 189). At that stage the Board under the presidency of Mr Gregor was in control.

55 In the absence of further evidence, I am unable to make any assessment of the nature of the committee proceedings and their validity. The significance of this evidence is only that it demonstrates that there was another area of dissension before the dispute between Mr Gregor and Mr Palmer developed, and that the management of the company was already in crisis.

The Board meeting of 26 March 2000

56 There was a momentous meeting of the board on 26 March 2000. The meeting was tape-recorded and minutes were prepared from the tape. It was attended by Mr Gregor as President, and he appears to have been chairman. David Palmer, Max Tabone, Tom Macindoe, Connie Meyer, Stanley Baker, Ron Franks, Jeremy Costello and Barry Druskat were present, though perhaps some were not present for the whole meeting.

57 There was discussion about the activities of Ms Voigt and her supporters. Mr Gregor described in emotive language some letters written by Ms Voigt which had evidently been critical of him, using such words as "gall", "temeritus letter" and "presumption to expel him". There was concern that Ms Voigt might be able to hijack meetings with only minority support. It was said that Ms Voigt wanted to challenge Mr Gregor over his nominees, admitted to membership just prior to the last Annual General Meeting, by alleging that they were “phantom entities”.

58 There was discussion about expanding the membership of the company by holding an open day for loyal members and people interested in becoming aware of the defendant's work. Mr Palmer warned of the danger of the company being infiltrated by opponents. There was also discussion about adding new directors. Mr Palmer and Mr Tabone moved a motion that a committee be formed, comprising themselves, to solicit donations. That the motion failed, after Ms Meyer objected to Mr Palmer "going forth to represent the company and the board".

59 Plans to move the defendant's library and administration to Falconbridge were discussed. As I have said, Mr Gregor and Mr Palmer disagreed on this issue. Eventually it was resolved that the bookroom be closed at the end of May 2000, the resolution being passed on the casting vote of the chairman. It was resolved to register the company's new address at Falconbridge with the Australian Securities and Investments Commission, but it was noted that this would be a temporary location pending resolution of the estate of Mr Nichols.

60 There was discussion about the memberships that had been processed prior to the last annual general meeting of the company. Mr Palmer and Mr Tabone moved that persons of non-Anglo/Saxon/Celtic origin whose applications for membership had been so processed should be treated as a temporary category of "Associated Friends of the BIWF", and he said that “these Asians” would be detrimental to the cause and they would assist Ms Voigt. The motion failed. Instead it was resolved that a letter be sent for all members to sign, "consistent with British-Israel understanding".

61 This led to a discussion about membership in general. Mr Palmer said "When you have to resort to bring in Nazis and Asians in the first place, you are in trouble - Big Trouble!" Mr Gregor gave a "break-down of the numbers" from the last Annual General meeting. The numbers were Mr Gregor = 17, Mr Tabone = 28 and Ms Voigt = 33. Apparently these were the numbers of members expected to support each of the three individuals who were named. It was noted that if the Gregor and Tabone votes were combined the total was 45, but it was said that Ms Voigt may since have gleaned more support. Other allegations were made against Ms Voigt.

62 Mr Palmer expressed concern about regularising contract between Israel and other races, specifically Asians. Mr Palmer and Mr Tabone moved that certain persons of Anglo/Saxon/Celtic origin, whose applications for membership had been held up at the last Annual General Meeting due to a technicality, be passed for membership. It appears that the applicants for membership had been introduced by Mr Palmer and Mr Tabone. The motion was carried, notwithstanding the opposition of Mr Gregor and Mr Macindoe. Ms Meyer complained that the others had moved far away from British-Israel principles, claiming that the organisation was not "about numbers", and she abstained from voting.

63 It appears that the outcome of this Board meeting contributed substantially to a deterioration in the relationship between Mr Gregor, on the one hand, and Mr Palmer and Mr Tabone on the other. Mr Gregor had used his casting vote for the closing down of the bookshop, a matter to which Mr Palmer and Mr Tabone strongly objected. They had endeavoured to deprive Mr Gregor's nominees of their status as members on the ground that they were Asian, and had failed. Some sharp words had been said.

The Board meeting of 16 April 2000

64 By notice dated 9 April 2000, Mr Gregor purported to convene a meeting of the Board of Management to be held on 16 April 2000, the purpose of which was said to be to address "a number of admin and other issues, delays to which could exacerbate our problems, and might also increase the work burdens of Secretary and other active Board members". It appears from the notice of meeting that it was issued to all those who had attended the meeting of 26 March 2000. No minutes of this meeting were put into evidence, and the affidavits say very little about it. I am left with the oral evidence about it given by Mr Gregor, Mr Palmer and Mr Tabone.

65 Mr Gregor gave evidence that he attended the meeting on 16 April 2000, but Mr Palmer said that Mr Gregor was not there and that Mr Tabone took the chair. I find Mr Palmer's evidence on this matter to be confused and unconvincing. I prefer the evidence of Mr Gregor. He had quite a specific recollection of the meeting, and obviously developed some deep resentments because of it. Moreover, Mr Tabone agreed in cross-examination that Mr Gregor was present at the meeting of 16 April 2000 (Transcript, Page 205).

66 There were at least three matters considered as the April meeting. First (though not necessarily first on the agenda), the meeting resolved to accept a substantial number of applications for membership. The precise terms of the resolution are not in evidence. Mr Gregor said that Mr Palmer and his supporters "foisted" on the Board "an unknown, unnamed, unlisted, unnumbered group of people" (Transcript, page 86), and the Board was "forced" to accept them as members. Apparently his complaint was, at least partly, that the resolution did not identify each of the applicants and their applications were not tabled at the meeting. It was suggested to him in cross-examination that the applications had been tabled at a previous meeting but he denied it. He claimed that this resolution demonstrated that Mr Palmer and his supporters, who voted in favour of it, "were prepared to act with such utter lack of integrity, that nobody could deal with these people responsibly any more"(Transcript, page 87).

67 Secondly, Mr Gregor proposed that Mr Jack Wallace, whom he described as "a former distinguished President" be elected to the Board. It seems to me probable that he proposed Mr Wallace to the Board so as to dilute the influence of Mr Palmer and his supporters. Once Ms Meyer had decided to vote with Mr Palmer on certain matters, including the question of admitting Mr Palmer's nominees to membership, Mr Gregor and his supporters no longer had a majority of votes on the Board. Mr Palmer and his supporters resisted the proposal, and Mr Palmer said he “had the numbers”. Mr Palmer's evidence is that Mr Wallace was a "known troublemaker" who had campaigned since 1992, after being defeated for the Presidency by Mr Tabone, to close down the bookroom (Transcript, page 119). Mr Gregor abandoned the proposal. There was also a proposal by Mr Franks to admit three named individuals to membership, which did not proceed when Mr Palmer opposed it.

68 The third matter considered at the April Board meeting was the question of closing the bookroom. The proposal to close the bookroom had been carried at the March meeting when Mr Gregor exercised his casting vote as chairman. This time the rescission of that decision was carried with the support of Ms Meyer, who changed the vote she had given at the March meeting.

69 The April meeting must have demonstrated to Mr Gregor that he had lost his controlling influence on the Board. It appears that he responded with some aggression. He wrote letters critical of Mr Palmer and Mr Tabone to the members. The letters are not in evidence, but it appears that they were full of strong criticism, leading Mr Palmer and Mr Tabone to move for the expulsion of Mr Gregor, as I shall explain. Mr Gregor also diverted the company's mail from the York Street premises to another address, and he made contact with Westpac Banking Corporation and the Commonwealth Bank to arrange for the company's bank account and the term deposit representing the distribution from the Nichols estate to be frozen by the banks. Additionally, Mr Gregor reported the events of the April meeting to Mr Browning of the BIWF in London. His contact with Mr Browning led to the withdrawal of the defendant's affiliation with the BIWF.

Withdrawal of affiliation by BIWF

70 It appears that the president of the BIWF in London, Matthew Browning, received more than 10 letters from Mr Gregor, and some letters from Mr Macindoe and Mr Franks, as well as a letter from Mr Palmer. He also received copies of correspondence sent to members by Mr Tabone. After considering the matter, the Executive Committee of the BIWF (comprising Mr Browning and two Vice Presidents) decided to withdraw affiliation.

71 On 22 May 2000 Mr Browning wrote in his capacity as President of the BIWF to Mr Gregor as President of the defendant. The letter said that the defendant's affiliation with the BIWF was being withdrawn, "because of evidence received concerning the character and disposition of certain members of the current Board of the New South Wales Branch …, revealing its present composition to be of uncertain integrity and ill-matched to the requirements and spirit of the Objects for which the Company was established - contained in its Articles of Association".

72 The Executive Committee's decision that the defendant be disaffiliated was confirmed by the Board of the BIWF at their meeting in July 2000. Mr Browning gave evidence that the Board subsequently discussed the proposal to wind up the defendant. The Board's view was that, since there was so much controversy amongst the membership and amongst those claiming to be members of the Board of the New South Wales Branch, it would be almost impossible for the members to resolve the situation; and it would be wiser to wind up the affairs of the New South Wales company and start afresh, so that the Federation might be able to secure and consolidate the assets of the New South Wales Branch and proceed at a subsequent date with re-affiliation. He said that the BIWF would receive the assets of the defendant, if it were wound up, as "security" for the re-establishment of the New South Wales Branch under properly constituted and acceptable management, and would not benefit at all from those assets (Transcript, p 164).

73 In cross-examination, Mr Browning was challenged as to the basis of the Executive Committee's decision to disaffiliate the New South Wales Branch, and it was put to him that the Executive Committee had acted unfairly and without sufficient investigation. Mr Browning said that the reason for the Executive Committee declaring those in control of the New South Wales Branch to be unsuitable was "because of their association with other groups which are really not agreeable to membership of our movement". He was not asked to specify those other groups.

74 I am not in a position to determine whether the Executive Committee's decision was justified by the evidence before it, or whether the inquiries they made were sufficient, because I do not have access to that evidence or the results of those inquiries. All I can say is that Mr Browning impressed me in the witness box as an honest and conscientious person, that he has had over 14 years' experience in his present role of President of the BIWF, and that nothing in the evidence in the present proceedings shows the Executive Committee's decision to have been deficient.

75 Mr Browning wrote to Mr Gregor again on 10 January 2001. He said:

"In consideration of all the evidence to hand it is abundantly clear that the quasi-Board, under the influence of David Palmer and his deluded supporters, is determined to continue their Korahic rebellion (read Numbers 16 and note vs 28-33 and 41-50; also Jude 11) against the properly constituted appointed authority until the earth opens her mouth and swallows them up or they die in the plague".

76 He said the modern counterparts of the Korahites refuse to acknowledge the Author Himself, even Jesus Christ. He strongly advised Mr Gregor to proceed with the dissolution of the company forthwith, and to secure the assets of the company with the purpose of furthering the objects for which the Federation was constituted. He invited Mr Gregor to nominate trustees for the approval of the BIWF, to hold the assets of the company until an appropriate organisation with similar objects could be selected.

77 Mr Palmer sent e-mails to Mr Browning on 15 and 22 March 2001. He complained that Mr Gregor had initiated a winding up application, which he (Mr Palmer) would oppose. He said that whoever won, it would be a financial disaster because both sides were spending British-Israel money. Mr Browning replied on 16 March 2001. He pointed out that the defendant's affiliation to the BIWF had been withdrawn. He then said that the Court's judgment in the present proceedings would be the starting point for the Board of Management of the BIWF in London to examine the bona fides of those officers of the Group who were concerned to apply for Branch affiliation. The letter concluded:

"It is apposite to note that we are in possession of public information from a variety of sources concerning your activities with other groups, quite inconsistent with membership of the BIWF. There will not, therefore, be further correspondence with you on the these or related matters."

The meetings between 16 April 2000 and 18 June 2000

78 It is important to establish how many meetings were held during this period, since (as I shall explain) the purported removal of Mr Gregor from the Presidency was based on his failure to attend three Board meetings. Mr Palmer gave oral evidence on the subject, but I found the evidence to be unclear and unpersuasive. Mr Tabone also gave oral evidence, which was clearer but also unpersuasive in some ways.

79 Mr Palmer said that after the meeting of 16 April 2000, Mr Gregor convened another meeting as President, but did not attend it. Mr Palmer was unable to produce any copy of a written notice of that meeting, although he agreed that Mr Gregor's standard practice was to give notice of all meetings of the Board in writing. Later, in re-examination, he said that the meeting Mr Gregor did not attend, after giving notice of it, was the meeting of 16 April 2000. I reject that evidence, as I have already found that Mr Gregor attended the meeting of 16 April 2000. The remaining question is whether Mr Gregor convened a subsequent meeting and then did not attend it. Mr Palmer's evidence was that when Mr Gregor did not attend, Mr Tabone was appointed acting chairman, and then Mr Tabone convened several further meetings.

80 Mr Tabone's evidence was rather different from the evidence of Mr Palmer. Mr Tabone said that there were three meetings between the meeting of 16 April and the meeting of 4 June, and that he convened all three of them. He did not claim that Mr Gregor authorised him to convene the meetings. When asked by what authority he acted, given that Mr Gregor was President and that the constitution of the company vested the power of convening Board meetings in the President, Mr Tabone said that he called the meetings to deal with the fact that scurrilous letters were being circulated and that illegal situations had taken place, and to ask for explanations (Transcript, Page 206). Later he said there were so many irregularities that action was needed to be taken to safeguard the interests of the company (Transcript, page 215).

81 Mr Palmer's evidence was not clear as to just how many further meetings were convened. At one point he seemed to say there were two such meetings, and at another point that there were three. In re-examination he admitted to being confused on the subject (Transcript, page 192). He said there "could have been" a meeting about a week after the meeting of 16 April, and that he believed there "may have been" a meeting in about mid-May, and then there were meetings on 28 May and 4 June (Transcript, page 192).

82 Mr Tabone said that there were in fact three meetings after 16 April and before 4 June. The first was roughly a week after the meeting held on 16 April. He said that Mr Franks attended one of the meetings.

83 It is necessary for me to make some findings, taking into account this tangled evidence. It seems to me unlikely that, after his defeats at the meeting of 16 April, Mr Gregor would have given notice of a subsequent meeting and then not attended it. Indeed, it seems to me unlikely that Mr Gregor would have given notice of a meeting at all, after the meeting of 16 April 2000 in which Mr Palmer's group became the dominant faction on the Board. He strategy seems to have been to attack Mr Palmer's position in other ways. Therefore my finding is that the meetings between 16 April and 4 June, and indeed the meeting of 4 June itself, were convened by Mr Tabone without Mr Gregor's authority as President.

84 The constitution of the defendant did not confer on Mr Tabone the authority to convene meetings of directors. He was not, at any rate at that time, the President of the company. However, if a meeting of the board of the company is convened by a director who gives of a notice of the time and place of the meeting to all the other directors, the fact that the director is not expressly authorised by the constitution of the company to convene board meetings is unlikely to mean that the meeting is invalid - especially where there is a reason why the person authorised to convene meetings would be unlikely to do so. Section 1322 (2) says that a proceeding under the Corporations Act is not invalidated because of a procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. A reference to a procedural irregularity includes a reference to a defect of notice (s 1322 (1) (b) (ii)). In the circumstances envisaged, it seems to me very unlikely that the Court would intervene to declare the meeting to be invalid, on the mere ground that a director other than the person authorised to convene the meeting had done so. The crucial question is whether the director who convened the meeting gave adequate notice to all other directors.

85 The only minutes in evidence of a meeting in the period from 16 April to 4 June 2000 are minutes of a meeting of 28 May 2000, which referred to a meeting of 21 May 2000. However, Mr Tabone's evidence that there was the third meeting, called about a week after 16 April 2000, was not challenged in cross-examination, and on balance it seems to me more likely than not that the third meeting took place.

86 There is no evidence of what occurred at that meeting, or at the meeting on 21 May 2000, but some evidence has been given about the meeting of 28 May 2000. The chairman of the meeting was Mr Tabone. Mr Palmer, Mr Costello, Mr Druskat, Ms Meyer and Mr Rafty were in attendance. It was resolved that Mr Gregor, Mr Franks, Mr Wallace and Mr Baker be suspended from all duties on behalf of the company, and from membership privileges, "until they present themselves before the Board to explain their inappropriate behaviour and actions". It was resolved that Mr Jason Rafty be appointed as a director, and that a "Donations Directorate" be established to be staffed by Mr Tabone and Mr Palmer, with Ms Meyer as its Secretary.

87 The plaintiffs challenged the proposition that Mr Rafty was a director at the time of the two subsequent meetings, held on 4 and 18 June 2000. According to records of the Australian Securities and Investments Commission which are in evidence, Mr Rafty became a director only in February 2001. On balance, it seems to me likely that Mr Rafty was appointed to the Board at the meeting on 28 May 2002. The minutes for that and the two subsequent meetings consistently show him to be a director. The ASIC records, which in other circumstances would be reliable, are dubious because the turmoil in the defendant company meant that the inputs to ASIC were not always reliable.

88 A further meeting, also convened by Mr Palmer, took place on 4 June 2000. Mr Palmer, Mr Tabone, Mr Costello, Mr Druskat, Ms Meyer and Mr Rafty attended. The meeting was also attended by a Mark Pavic, described in the minutes as a "visitor" attending as "Meeting Procedure Advisor".

89 There were three principal resolutions purportedly adopted. The first was a resolution declaring that the 16 membership applications supported by Mr Gregor and presented on 21 December 1999 (the minutes inaccurately say 21 December 2000) were invalid. The names of the 16 applicants, all evidently with Korean names, were listed. It was resolved that they be advised of the resolution and that their membership fees be returned to them. I cannot see any lawful basis for such a resolution to be adopted, especially since those affected by it were evidently given no notice of the intention to adopt the resolution, and no attempt appears to have been made to bring the resolution within article 59.

90 The second was a resolution, purportedly adopted under article 36, that the office of President be declared vacant because Mr Gregor had absented himself from three consecutive meetings of the board without the board's permission. It was resolved that Mr Tabone be appointed to fill the vacant position of President. For the reasons given below, I have reached the conclusion that Mr Gregor was not given notice of the three meetings convened and held after 16 April and before 4 June. That being so, he cannot have "absented himself" from any of those meetings. Consequently the second resolution was not valid.

91 Thirdly, it was resolved that it be put as a motion on notice that Mr Gregor be expelled from the company "for divulging proceedings of meetings, so as to cause disturbance, and to reflect improperly on the decisions of the Directors, and so as to bring the same into contempt, by the writing of letters". The resolutions stated that in accordance with article 59, Mr Gregor was to be given notice of the charge being made against him, and to have the opportunity to be heard in his own defence at the next board meeting, to be held on 18 June 2000. Identical motions were passed in respect of Mr Franks and Mr Jack Wallace.

92 Since (for reasons given below) Mr Gregor was not given notice of the meeting of 4 June 2000, this resolution might well be open to challenge if it purported immediately to affect his rights. But it does not do so. It is only a resolution that he be given notice so that a decision can be taken on the next occasion. Article 59, the article dealing with expulsion of members, requires that the member be given notice of the charge laid against him and the opportunity of being heard in his own defence. It is not necessary, in my opinion, that there be a valid resolution of the directors for the giving of notice, provided that notice is given and received. Mr Gregor was given notice of the terms of this resolution by registered letter, which he received (according to his evidence) a day or so before the scheduled meeting was to be held on 18 June 2000.

93 There may, however, be two grounds for challenging the procedure set in train by this resolution. One is that notice of only a day or so is inadequate to satisfy the requirements of article 59. The other is that the resolution notified to Mr Gregor merely tracks the terms of the relevant part of article 59, without giving any particulars. It is at least doubtful that a resolution in this form constitutes notice of the "charge laid against him" for the purposes of article 59.

94 The meeting also resolved to appoint new signatories to bank accounts and to make a demand on Mr Gregor and on Ms Voigt and others that they return company property in their possession.

95 On 9 June 2000 Mr Gregor wrote to Mr Palmer, Mr Tabone, Mr Druskat, Mr Costello, Ms Meyer and Mr Rafty. The letter alleged that there were defects in the appointment of Mr Druskat, Mr Costello, Mr Palmer and Mr Rafty as directors. Mr Gregor contended that under the Conditions of Membership brochure they had no right to vote at meetings, because they had been enrolled for less than 12 months and were therefore classified as associate members. They had not been properly elevated by the Board to the status of active members. In the case of Mr Rafty, Mr Gregor contended that his appointment to the Board occurred at an invalid meeting. He asserted that the four people he had named were not directors of the Board of Management and he required that they return keys and company documents to the Secretary, Mr Macindoe, within 14 days. Mr Gregor contended that the legitimate Board of Management comprised only Mr Tabone, Ms Meyer, Mr Macindoe, Mr Franks and himself. In his evidence he said that he did not invoke the dispute resolution procedure in article 62 of the company's constitution because he believed that his opponents were not a validly constituted Board.

96 In my opinion Mr Gregor's letter was incorrect to the extent that it purported to rely on non-compliance with the Conditions of Membership brochure. For the reasons I have given, my view is that the brochure should be treated as having no legal effect. In particular, provisions in the brochure that purport to deny a person who has been admitted to membership under article 7 the right to vote conferred by article 32 or the right to become a member of the Board of Management conferred by article 35, is ineffective.

97 Letters were written to Mr Gregor on 13 June 2000 notifying him of each of the resolutions affecting his interests and specifying that the next board meeting would be held on 18 June 2000. The letters were sent by registered mail. Mr Gregor says he received them a day or so before 18 June 2000. I have no good reason to disbelieve Mr Gregor's evidence on this point. I find it surprising that, when the resolutions to be notified to Mr Gregor were the adopted on 4 June, it took until 13 June to write the letters, and it would be consistent with that delay if the letters were not posted immediately after they were written on 13 June.

Did Mr Gregor receive notice of the meetings of 21 and 28 May, and 4 June 2000?

98 Mr Gregor did not attend the meeting held about a week after 16 April, nor the meetings of 21 May, 28 May or 4 June 2000. He has consistently maintained that he did not receive notice of those meetings. He admitted to having received notice of the next meeting, held on 18 June 2000, though he said he received the letter only a day or so before the meeting.

99 Mr Palmer gave evidence that notice to Mr Gregor was "attempted by fax, by telephone, and by attempting to have it relayed to him particularly by Tom Macindoe". However, he was unable to produce any record of facsimile transmission. He said this was because of difficulties with his computer. Nor was he able to produce any other written notice of the meetings. I found Mr Palmer's evidence unconvincing on this issue. In any case, at most it amounts to an assertion that "attempts" were made to notify Mr Gregor.

100 Mr Tabone said in cross-examination that he called the meetings and notified Mr Macindoe, and in re-examination he said that Mr Gregor and his supporters were asked by letter to attend the meetings and give an explanation. This evidence is not satisfactory, in my view. If his evidence was that written notification was given to Mr Gregor of each of the meetings, one would have expected him to say so during cross-examination. If his evidence was that notice took the form of an invitation to attend and give an explanation, it is implausible to say that such an invitation would have been issued from the outset, given that the procedure that was adopted involved the issue of an invitation to answer the charges only at the fourth meeting. It seems to me more likely that the only attempts to notify Mr Gregor was by informing Mr Macindoe of the meetings.

101 My conclusion, weighing up the evidence of Mr Palmer and Mr Tabone against the evidence of Mr Gregor and taking into account my observations of them in the witness box, is that Mr Gregor was not given notice of any of the three meetings, directly by the convener, Mr Tabone, or by Mr Palmer on Mr Tabone's behalf. There was no successful facsimile transmission to Mr Gregor, and no telephone call from Mr Tabone or Mr Palmer to inform him of the convening of any of the meetings. Mr Macindoe was probably informed of the meetings, but there is no evidence that he passed on the information to Mr Gregor.

102 In the absence of contrary provision in the corporate constitution, each director is entitled to notice of a board meeting, provided the director can be reached by notice: Mitropoulos v Greek Orthodox Church (1993) 10 ACSR 134. Failure to give notice of a board meeting to a director may be cured by s 1322 (3) where the omission is "accidental". In my opinion the omission in the present case could not be described as accidental. Section 1322 (2) (referred to above) also has an application. The Court also has the power under s 1322 (4) (a) to make an order declaring that a thing purporting to have been done in relation to a corporation is not invalid by reason of a contravention of a provision of the constitution of the corporation, where the requirements of s 1322 (6) are satisfied. In the case of both subsection (2) and subsection (4), the Court must consider whether the deficiency is likely to cause substantial injustice. Given the serious effects on Mr Gregor of the decisions taken between 16 April and 4 June, a court may well conclude that substantial injustice to him would be likely if the resolutions of those meetings were treated as valid. It is unnecessary to decide whether the Court would make an order declaring the meetings invalid under subsection (2) or valid under subsection (4). It is sufficient for present purposes to say that there is a significant risk of invalidity.

The meeting of 18 June 2000, purporting to expel Mr Gregor from membership

103 A meeting, purporting to be a meeting of the Board of Management, was held on 18 June 2000. Mr Tabone was chairman, and Mr Palmer, Mr Costello, Mr Druskat, Ms Meyer and Mr Rafty were present. Mr Pavic was present as Meeting Procedure Advisor. Mr Palmer and Mr Druskat moved as follows:

That he should be expelled from the Company

104 In my opinion this resolution is not valid. Article 59 is subject to the proviso that the member be given notice of the charges laid against him and the opportunity of being heard in his own defence, before a decision is taken to expel him. The requirement of procedural fairness is a condition precedent to the valid exercise of the power of expulsion. Earlier I expressed my doubt as to whether the resolutions of the meeting of 4 June adequately gave notice of the charge laid against Mr Gregor. What emerges from the resolution of 18 June is that the matters held against Mr Gregor included some grounds falling outside the description contained in the resolution of 4 June. Indeed, only items 6, 10, 12 and 13 appear to have any connection with the "charges" contained in the resolution of 4 June. Moreover, the "charges" in the resolution of 18 June are expressed broadly and without particulars. Only items 1, 3, 5, 7 and 8 could be said to have any level of particularity. Therefore, even if the resolution of 4 June was sufficient to give notice of the charges laid against Mr Gregor, the resolution of 18 June was improper. I have the additional concern that if the 13 matters specified in the resolution of 18 June were put to Mr Gregor as charges, he would be entitled under article 59 to notice substantially longer than about a day to prepare his defence.

105 Similar motions were moved by others present at the meeting, and carried, against Mr Franks and Mr Wallace. They appear to suffer from the same defects as the resolution affecting Mr Gregor, although in the case of the others the evidence does not show when the letters of notification were posted and received. The matters specified in the case of Mr Franks were:

106 In the case of Mr Wallace, the matters specified were:

107 A motion was also put on notice that Mr Macindoe be expelled from the company, and that he be given notice of the charges laid against him and the opportunity to be heard in his own defence at the next board meeting, to be held on 2 July 2000. It was resolved that Mr Macindoe be removed immediately from the position of Honorary Secretary, and that Mr Palmer be appointed in his place.

108 Concurrently with the meeting of the Palmer group's Board, the Gregor group was active. Mr Gregor wrote to Ms Meyer and Mr Tabone on 26 June 2000, claiming that resolutions had been passed at a legally constituted meeting of the Board of Management held on 18 June 2000 suspending their status as board members and members of the company until 30 June 2000. Thereafter their memberships would not be renewed. The letter continued:

"The above action has been taken as a result of the outrageously improper motion which you supported on 16-4-2000 regarding acceptance of an unknown, un-named and un-numbered group of alleged membership applicants in respect of whom no membership applications were tabled before the Board. Your attendance at 3 "Board" Meetings not validated by proper prior notice, at the last of which it was known that the appointment of most of those present was defective, and your support for the declared bias of D Palmer on 16-4-2000 in respect of acceptance of new members and Board Members, was also considered. The foregoing behaviour and activities were part of the reason why our Certificate of Affiliation was revoked."

109 On the same day Mr Gregor wrote to Mr Palmer, Mr Druskat, Mr Costello and Mr Rafty. The letter said:

"For improperly parading as Board Members of this Company, and for participating in an illegal Board Meeting purporting to usurp the authority of the legitimate Board, all since you were severally notified of the defect in your status as Board Members, we the legitimate Board have suspended your membership with effect from 18-6-2000 to midnight 30-6-2000, and further we resolved to not renew your respective membership on or after 1-7-2000."

Events after the purported expulsion

110 Since that time, two groups have purported to be the Board of Management of the defendant. One "board" purports to meet its under the Presidency of Mr Tabone ("the Tabone Board") and the other purports to meet under the Presidency of Mr Gregor ("the Gregor Board").

111 The Gregor Board was constituted when Mr Gregor, Mr Franks and Mr Macindoe purported to elect new directors to supply a quorum, the new directors being Lilian Richardson and Lester Hanson. The Gregor Board has purported to admit approximately six new members, and in June 2000 it sent out to the members of the company known to it a notice of renewal of subscriptions for the year beginning 1 July 2000. Approximately 40 members renewed their subscriptions and the relevant funds are held by the Gregor Board in a bank account.

112 In my opinion the Gregor Board is not properly constituted. It was formed on the basis that directors in the Palmer group had not been validly appointed, and therefore that it was open to Mr Gregor and his colleagues to appoint new directors to bring the Board up to a quorum. But the premise is unsound, since it relies on non-compliance with the Conditions of Membership brochure, which is of no legal effect. The true position is that Mr Gregor and his colleagues who were directors prior to 4 June remain so, as do the directors in the Palmer group. Hence the true Board is a bitterly divided group of people, which has not been functioning as a Board since 16 April 2000.

113 Mr Gregor wrote to the members of the Tabone Board on 3 August 2000 saying that the Board of Management of the company did not recognise or accept responsibility for any liabilities undertaken by them ostensibly on behalf of the company. The Tabone Board has purported to convene an annual general meeting, held on 21 January 2001, as explained below.

114 On 18 September 2000 Mr Gregor purported to propose a motion to the Board of Management in the following terms:

d) Because the pretext of the NAZI & TRAITOR COLLECTIVE at being a "Board" of the Company in contest to our claim to be the rightful Board, presents to outsiders a confused perception of "factional division" which has led to freezing of our Bank A/cs, disruption of Inward Mail, collapse of member and support interest, subversion of the objects of the Federation, and reveals conspiratorial intentions by the NAZIS in connection with the KD Nichols Estate.

115 The motion proceeded to make provision for the BIWF to request the liquidator that the books and other library assets not be liquidated but that all debts be met from be Company's bank accounts and that residual assets then pass "as is" to the BIWF.

116 It appears that there was no meeting to consider Mr Gregor's motion. Instead, he circulated the text to the people he regarded as members of the Board, with provision for each of them to signify their approval or disapproval and to sign and date the document. The document identified seven people as board members, and each of them signed a copy of it.

117 The letter implied, wrongly, that the provisions of the Corporations Law (as then in force) dealing with directors' circulating resolutions without a meeting were applicable. There is no provision in the defendant's constitution for decisions of the directors to be made by circulated resolutions without a meeting. Section 248A of the Corporations Act (replacing the equivalent provision of the Corporations Law), which permits the directors of a company to pass a resolution if all the directors sign a document stating they are in favour of the resolution, does not apply to the defendant, because it is a replaceable rule not applying to a company registered before 1 July 1998 unless the company repeals its constitution after that day (s 135 (1) (a)).

118 There is evidence to indicate that during the latter half of 2000 Mr Gregor, Mr Macindoe and others purported to act on behalf of the defendant by collecting donations and otherwise. Mr Gregor said that in addition to the circulating resolution proposed on 18 September 2000, he had some meetings with his Board by Telstra tele-conference, although he gave no particular evidence about the content of the meetings. Section 248D now permits companies such as the defendant to hold directors' meetings using technology such as a video-conference or telephone conference, but only if this is consented to by all the directors.

The Purported Annual General Meeting of 21 January 2001

119 The Tabone Board purported to issue a notice of annual general meeting on 11 December 2000, calling for nomination of candidates for positions as directors of the company for the year 2001. The notice stated that nominations must be signed by the candidate and by at least two active members as proposers. Retiring directors would be eligible for re-election. The meeting was to be held on 21 January 2001.

120 A meeting purporting to be the annual general meeting of the defendant was held on 21 January 2001. Mr Tabone was chairman, and Mr Palmer, Mr Druskat, Ms Meyer, Mr Rafty and Mr Pavic (apparently this time as a member) were present, together with 10 others. The meeting resolved that all members who had been nominated and consented to serve on the Board of Management were thereby raised to active membership. Fewer candidates were nominated than there were positions available to the filled, and accordingly all candidates were declared to be elected. Those purportedly elected included Mr Tabone as President, Mr Palmer as Vice-President and Secretary, Ms Meyer, Mr Druskat and Mr Rafty, and nine others.

121 The validity of this meeting as an annual general meeting depends upon whether it was properly convened. Article 12 of the constitution of the defendant permits general meetings to be convened by the Board. It cannot be suggested that all of the directors entitled to be notified were given notice of a meeting of the Board to resolve to convene the general meeting. The purported decision of the directors to convene the general meeting would be invalid subject to s 1322. Another ground for invalidity would arise if it appeared that a significant number of members were not duly given notice of the meeting. This raises a question about the integrity of the Tabone Board's Register of Members

122 Mr Gregor claims that only six of those in attendance were in fact members. He relies on a list of members which he and other members of the Gregor Board have maintained, though the basis for admitting people to the list and rejecting others from it was not clearly stated in evidence. When he eventually obtained a copy of the Register of Members maintained by the defendant in July 2001, he compared it with the register maintained by the Gregor Board and found that of the 84 names appearing on the defendant's register, only 15 names also appeared on be register maintained by the Gregor Board. Mr Gregor gave evidence that in some other cases memberships were not financial, and that his Board did not accept the remaining persons whose names appear on the defendant's register as members of the defendant, for reasons that he did not explain.

The Register of Members

123 One of the issues of controversy relates to the accuracy of the defendant's Register of Members. Mr Palmer gave evidence that he prepared the Register in order to comply with the requirement of the Court that it be supplied to the plaintiffs. He said that the previous Register of Members had been removed by Mr Macindoe, and that the company had many times asked Mr Macindoe to return it but he refused to do so. Therefore it was necessary for Mr Palmer to prepare a new Register from receipts, old membership lists, photocopies of membership lists and other information supplied by Mr Tabone and received from members. He said that difficulties had arisen because Mr Gregor had redirected company mail to another address, and therefore some membership subscriptions had not been received by Mr Palmer and his colleagues.

124 Mr Gregor made numerous criticisms of the Register in his affidavit and in his oral evidence. It is not possible for the Court to decide, on the meagre evidence before it, the correct status of the individuals and groups who were questioned by Mr Gregor. To a substantial degree, the Court has before it no more than a series of allegations by Mr Gregor and counter-allegations by Mr Palmer and his colleagues.

125 However, it is of some significance to this case that in cross-examination, Mr Palmer acknowledged (Transcript, page 138) that the Register of Members was produced in a hurry and is inaccurate. Many of the people recorded as having apologised for not attending the annual general meeting of 21 January 2001 are not recorded as members in the Register of Members. Mr Palmer acknowledged that there were "a couple of dead people" recorded on the list. And he acknowledged that it would be difficult to find out the correct membership position as at today (Transcript, page 142).

126 Mr Palmer also acknowledged that there was a "complete mix up" about membership fees at the annual general meeting on 21 January 2001 and that most of those attending would not have paid the correct membership fee (Transcript, page 141). He said that Mr Gregor's diversion of company mail had cause a lot of confusion, and that if someone said they had paid the membership fee to Mr Gregor's address, the Board's policy was to accept that person as a member. However, he said he was not prepared to apply that policy to Mr Trevor Baker because Mr Baker was under the influence of Mr Gregor.

127 Mr Palmer gave evidence that the Register of Members was highly confidential and politically sensitive material. He explained that he did not want Mr Gregor and his companions to have access to it because he was afraid they would contact the people on the list and send them literature and cartoons (Transcript, page 176). Of course, the register of members of a company, required to be maintained by ss 168 and 169 of the Corporations Act, is open for inspection without charge by any member under s 173, subject to the restriction in s 177.

128 In cross-examination Mr Palmer said that about 30 of the 84 members in the Register of Members had been admitted to membership since December 1999. Some of them were admitted as a block admission by resolution of the Board of Management on 16 April 2000, in the circumstances I have explained. Mr Palmer said he thought that seven or 11 members were admitted in that way. He said the new members were admitted as associate members and he expressed the opinion that they were entitled to vote at meetings of members. This opinion is directly contrary to the provisions of the Conditions of Membership brochure. There is no direct evidence as to whether associate members were permitted to vote at the meeting held on 21 January 2001, but in view of the opinion expressed by Mr Palmer in cross-examination, it seems likely that they were. Since, however, the Conditions of Membership brochure is probably invalid to the extent that it purports to deprive the members of voting rights, a decision to permit newly admitted members to vote would have been correct.

The defendant's attempts to "unfreeze" bank funds

129 On 18 July 2000 Westpac Banking Corporation wrote to Mr Gregor as President confirming that the term deposit would not be released until the true owner of the money was confirmed to the bank, the most likely method of confirmation being by Court Order. A similar letter was written by the Commonwealth Bank of Australia to Mr Palmer on 21 December 2000 with respect to a cheque account and a savings investment account, stating that until a court order or resolution within the Federation's constitution was made, the accounts would remain "stopped" and cheques and direct debits would be dishonoured.

130 The defendant's solicitor wrote to the Commonwealth Bank on 21 May 2001 challenging the bank's decision to stop the accounts, and demanding a detailed written justification of the bank's position. The bank replied on 22 March 2001, saying that according to the information in its possession, questions arose about whether meetings had been properly held from February 2000, and reiterating that it needed an appropriate court order or other satisfactory documentation before it would allow the company to operate the accounts.

Payment of rent for the York Street premises

131 On 24 May 2001 the agents for the landlord of the York Street premises wrote to the defendant's solicitor saying that rent was in arrears in the sum of $8511.71 and that eviction was highly probable unless funds were received within the next seven days.

132 The defendant's solicitor has proposed to the plaintiffs' solicitor that the plaintiffs consent to the release of funds in the Commonwealth Bank account for payment towards arrears of rent. The plaintiffs have said they would consent only if it was agreed that the bookroom be closed. Not surprisingly, this proposal has not been accepted by the defendant.

Financial records

133 There is evidence that Mr Macindoe with the acquiescence of Mr Gregor arranged for the Australian Taxation Office to issue an Australian Business Number to the defendant, and that he lodged a Business Activity Statement. However, the Statement did not take into account book sales from the York Street bookroom after the split between the rival boards.

134 Mr Palmer gave oral evidence that no financial statements were laid before the annual general meeting held on 21 January 2001, and that no financial statements had since been prepared. He said that he was unaware that anyone had ever filed financial statements for the year ended June 2000 with ASIC.

The "just and equitable" ground

135 In Re-Westbourne Galleries Ltd [1973] AC 360 the House of Lords stressed that this ground of winding up confers upon the Court a discretionary power of a very wide character, which the Court should be ready to apply in new situations falling outside the previous illustrations. Of course, especially given the seriousness of the remedy, the discretion must be exercised judicially, and the Court must give reasons for the exercise of the discretion that can be examined and justified: Baird v Lees 1924 SC 83, 90; Ford's Principles of Corporations Law (Butterworths, looseleaf), paragraph [11.388].

136 The Westbourne Galleries case had the effect of expanding the "just and equitable" ground to bring in broad equitable considerations, overriding the categories into which the case law was previously subdivided. Nevertheless, judges considering the "just and equitable" ground frequently have regard to the pre-existing categories, while taking care not to treat those categories as rigid or comprehensive: see, for example, International Hospitality Concepts v National Marketing Concepts (No 2) (1994) 13 ACSR 369, where Young J (as the Chief Judge in Equity then was) identified the following three categories (at 371):

· where initially it is, or later becomes, impossible to achieve the objects for which the company was formed;

· where it has become impossible to carry on the business of the company; or

· where there has been serious fraud, misconduct or oppression in regard to the affairs of the company.

137 It is not easy to apply the recognised categories directly in a case of the present kind, where the company is not a commercial company. Nevertheless the plaintiffs seek to bring the facts within the recognised categories by specifying complaints of the following four kinds:

138 As to paragraph (1), I am not sure that it is correct to categorise the case as one of oppression of one faction by another. It is rather case of bitter conflict in which each side has endeavoured to use the rules of the organisation, frequently mistakenly, to achieve its objectives. While the facts bear an analogy with the facts in the Re Ingleburn Horse and Pony Club Ltd [1973] 1 NSWLR 641, where oppression was found, there are also some factual points of distinction. In that case the majority of the committee represented the minority faction of members, and the Court appears to have concluded that while they believed they were acting in the best interests of the company, the majority committee members acted in order to preserve their control and exclude those interested in competing activities. Here, the factions are more finally balanced and the purported exclusionary activities by the Palmer group have largely been unsuccessful in law.

139 It appears to me that the plaintiffs' paragraph (2) identifies a valid and weighty ground for making a winding up order in this case. On the analysis that I have presented, both factions remain on the board, and although the Palmer group may have an edge in voting power over the Gregor group, the position at the membership level is totally obscure. The membership records of the company appear, on the evidence, to be in an irretrievable mess. Mr Palmer admits that the Register of Members of the company is inaccurate, indeed substantially so, and Mr Gregor's list is based only on the information known to him, which is necessarily less than the full picture. And the lists are very different from one another.

140 Re-admission of all members, without an overhaul of the composition of the Board, would involve the exercise of discretion as to whether applicants for membership were people having Christian principles. In my judgment the present Board, so riven by strife, would find it almost impossibly difficult, as a practical matter, to exercise that discretion validly, such would be the temptation to admit supporters and exclude opponents. There are substantial allegations by each faction against the other that this has occurred already.

141 One is left with a company the Board of which comprises bitterly opposed factions who clearly cannot work together and make sensible decisions for the future of the company. It was very plain from the oral evidence that the relationship between Mr Gregor and Mr Palmer has completely broken down, and they are bitterly opposed to one another. Mr Gregor claimed that Mr Palmer utterly lack integrity (Transcript, page 87) and Mr Palmer referred to Mr Gregor as a "Svengali" who wished to torpedo the company and to receive benefits by forming a new company (Transcript, pp 136 and 143).

142 This deplorable situation has occurred at the very time in the affairs of the company when rational forward planning and sensible decision-making are greatly needed, because of the cost pressures on the York Street bookroom and the arrival of the Nichols bequest. It will be possible for the Board to make decisions only if the ascendant group for the time being exercises, necessarily in a ruthless fashion, its voting power, and yet that voting power will depend upon the annual decisions of members as to the election of the directors, and the identity of the membership is not and cannot as a practical matter be known.

143 Not surprisingly, the banks have decided to prevent the company's accounts from being used until the situation is clarified by Court order or otherwise. The Court has a responsibility to produce the necessary clarification if it is satisfied, as I am in this case, that the parties will be unable to achieve clarification for themselves.

144 As to paragraph (3), the plaintiff points out that failure to comply with statutory and constitutional requirements may in appropriate circumstances provide grounds for winding up: Loch v John Blackwood Ltd [1924] AC 783; Re Kurilpa Protestant Hall Ltd [1946] St R Qld 170. The plaintiff says that the defendant has failed to prepare the annual financial report and directors report for the year ended 30 June 2000, and to have the financial report audited, contrary to the requirements of ss 292 and 301 of the Corporations Act. It has failed to send reports to members, contrary to s 314. It has failed to lay the financial report, the directors report and the auditors report before the annual general meeting purportedly held on 21 January 2001, contrary to s 317. It has failed to comply with the provisions of paragraph 57 of the constitution of the company by failing to collect annual subscriptions.

145 I find all these contraventions to have been made out. However, I have also found that the Gregor group has contravened some provisions of the constitution of the company in purporting to conduct a separate Board to the exclusion of the Palmer group. Moreover, given the nature of the company, I would not regard the contraventions by the defendant as warranting an order that the company be wound up.

146 Were it not for the more fundamental problems identified in my comments on paragraph (2) above, I would regard the contraventions as soluble by some lesser remedy. Given, however, the situation described in my comments on paragraph (2), the contraventions provide an additional but not independently weighty ground supporting the making of a winding up order.

147 Paragraph (4) also raises a matter of some significance. It is incorrect to describe the BIWF as the parent body of the defendant. However, it has a significant role to play in the affairs of the defendant, both with respect to affiliation and communications generally, and with respect to the destination of surplus assets on winding up. These matters give the BIWF a legitimate interest in the affairs of the defendant.

148 The BIWF has made its position plain. It does not want the Palmer group to continue in control of the defendant. It supports the present application for the winding up of the company. It sees this is a means of reconstituting the New South Wales Branch under the control of people in whom the BIWF will have confidence. It does not seek access to or control over the Nichols bequest or the British-Israel company of New South Wales on ongoing basis, but wishes to intervene only to resolve what it sees as a serious problem arising in the present circumstances.

149 It is, of course, not for the BIWF to determine whether the defendant should be wound up. Its interest in surplus assets on winding up does not give it standing to apply for winding up, since it is not a contributory, let alone to dictate the outcome of the application. It does not purport to do so. However, its attitude is a relevant factor for the Court to take into account. Intervention by the BIWF in the manner it proposes provides a way forward. It offers the prospect of permitting the Nichols bequest to be applied towards the objects of the British-Israel movement in accordance with the wishes of the testator and in a manner which the ordinary subscribers to British-Israel beliefs would regard as sensible. The BIWF has the religious credentials necessary for making decisions with respect to the accreditation of a new body to carry on the work of the British-Israel movement in New South Wales. As I have said, I was impressed by Mr Browning, who has substantial experience in managing an organisation of this kind and clearly takes a personal interest in the affairs of the New South Wales Branch.

150 Weighing up these factors as best I can, it seems to me that a strong case for the making of a winding up order has been made out.

Discretionary considerations against the making of an order

151 The defendant made submissions to the effect that the Gregor group has been motivated by an improper motive, namely that by winding up the company and forming a new entity with the support of the BIWF, they will obtain control of the Nichols bequest. In my opinion that is partly true, but unobjectionable. The evidence indicates that the plaintiffs believe that the Palmer group should not have control of the company's assets, including the Nichols bequest. They wish to have the company wound up so that, under the memorandum of association, the assets will pass to the BIWF, which has indicated that it will investigate the matter and apply the assets to a new entity. The plaintiffs aspire to be part of that new entity. I see nothing objectionable in their doing so.

152 The defendant made a similar argument contending that the plaintiffs lack clean hands. That was partly because of their alleged ulterior motive, and partly because, according to the submission, Mr Gregor created the problem for himself by choosing to exclude himself from the Board's deliberations leading to his removal and expulsion. Reliance is also placed on the fact that Mr Trevor Baker was said to be a stooge or puppet. In my opinion there is no substance to this claim. My findings of fact leave no room for the submission that Mr Gregor brought the dispute with Mr Palmer upon himself by his actions. I do not condone his decision to keep away from the meeting of which he had notice, namely the meeting on 18 June 2000. But by that time three meetings had been held of which he had not been notified. I have analysed the position of Mr Baker and have concluded that he is a bona fide member entitled under the Corporations Act to be a plaintiff.

153 The defendant also criticises the plaintiffs for not bringing the dispute within article 62. To bring their dispute before a group of people who were their enemies would have been a fiasco. The article should not be construed to produce such an effect. In my opinion, article 62 does not apply because the dispute between the Gregor group and the Palmer group is not properly characterised as a dispute between a member and the company or between an officer and a member.

154 The evidence includes a body of correspondence between the solicitors for the parties, Boyle Associates (their letters dated 29 March 2001, 4 April 2001, and 9 April 2001) and Taylor Kelso (their letters dated 2 April 2001 and 6 April 2001) debating the question whether Mr Kelso should cease to act for the plaintiffs because he had previously acted for the defendant company. As Taylor Kelso observed in their letter of 6 April 2001, it was open to the defendant to make an appropriate application to challenge Mr Kelso's retainer. It has not done so, but instead it seeks to rely on Mr Kelso's continuing to act as a matter to be taken into account in the Court's determination of the plaintiffs' application for relief.

155 It seems to me not established that Mr Kelso has at any stage been in a position of conflict such as to require him to withdraw from representing the plaintiffs. In their letter of 2 April 2001, paragraph 3, Taylor Kelso justified their continuing to act. If the assertions made in that paragraph are correct, their justification for continuing to act is, in my view, made out. Although some of the statements in paragraph 3 were challenged by Boyle Associates in their correspondence, they have not been disapproved by evidence. As to one of the matters in dispute, namely whether Taylor Kelso was paid by the company or Mr Gregor personally, it seems to me that Mr Kelso would not be precluded from continuing to act if the company rather than Mr Kelso had paid him, provided that the work related to the contest between the two "Boards", or to work unrelated to matters of conflict, as Taylor Kelso alleges. Therefore, in my view, the fact that Mr Kelso has continued to act for the plaintiffs provides no basis for denying them the relief they seek.

156 By a letter dated 31 May 2001, Taylor Kelso on behalf of the plaintiffs wrote to the defendant's solicitor, Boyle Associates, putting forward a proposal to resolve the deadlock in the management of the company and to enable the company to continue to operate. The proposal involved the BIWF of the UK appointing seven Australian residents to be directors of the defendant company, to operate the Board pending the convening of a meeting of members. The new directors would invite everyone appearing on the lists of members of the defendant maintained respectively by the Gregor Board and see Tabone Board to reapply for membership of the company. The new Board would have full authority to admit or reject applicants for membership, and would act in accordance with the Conditions of Membership brochure. Once applications for membership has been processed, the new Board would convene a meeting of members with a view to electing a Board which would then have full authority to manage the company.

157 That seems to me to be a sensible proposal that would have been worth further exploration. Unfortunately, by their letter dated 13 June 2001 Boyle Associates responded negatively and, indeed, in a hostile fashion. The basis for their objection seems to have been that there had been a without prejudice discussion along similar lines, which led them to believe that it was somehow unethical for Taylor Kelso to raise the matter in open correspondence. That is absurd. Boyle Associates said: "If you wish to obtain a response, please withdraw that letter and re-issue as a without prejudice letter". That comment seems to misunderstand the purpose and effect of Taylor Kelso's letter, and is an unreasonable response.

158 Section 467 (4) of the Corporations Act requires the Court to make a winding up order where the stated conditions are satisfied, unless it is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy: see Belgiorno-Zegna v Exben Pty Ltd (2000) 35 ACSR 305, 332. In my opinion the plaintiffs acted reasonably in instructing Taylor Kelso to put forward their proposal of 31 May 2001. In light of the reply by Boyle Associates, it is not unreasonable for the plaintiffs to seek to have the company wound up instead of pursuing the alternative arrangements outlined in Taylor Kelso's letter. Sadly, Boyle Associates' letter points to the conclusion that there is no practical likelihood of the plaintiffs succeeding in negotiating any proposal with the defendant short of winding up.

159 I agree with the plaintiffs that it is reasonable for them not to pursue the remedy of convening an extraordinary general meeting of members to consider appropriate resolutions, because the identity of the membership is highly uncertain. I do not see any other basis of reaching a modus vivendi between the two factions. Nor has any reasonable and plausible order been suggested for relief under Part 2F.1, assuming that one of the grounds for relief under the Part is available. I see no practicable alternative to a winding up order.

Conclusion

160 It is established by the facts that it would be just and equitable for the defendant company to be wound up. Winding up will provide the best chance for the assets of the company, including the KD Nichols bequest, to be applied for the purposes of the present company and more generally, the British-Israel movement. I shall make a winding up order accordingly.

161 The plaintiffs have nominated Geoffrey David McDonald, an official liquidator, to be the liquidator in the event that an order is made. The defendant has nominated another official liquidator, Andrew Hugh Wily. There being no evidence before the Court as to the non-suitability of either person, in my view the plaintiffs' choice should be preferred. It is no longer the practice of the Court to select an official liquidator from the Registrar's list. However, I would like to see a fresh consent to the appointment from Mr McDonald before I make the orders.

162 I shall stand the proceedings over for a short time to give the plaintiffs the opportunity to obtain a fresh consent to appointment by Mr McDonald, and I shall make orders and hear submissions as to costs on the next occasion.

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Last Modified: 05/21/2002

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Citations

Gregor v British-Israel-World Federation [2002] NSWSC 12

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CITATION:	Gregor v British-Israel-World Federation [2002] NSWSC 12
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 1630/01
HEARING DATE(S):	16, 17 & 18 October 2001
JUDGMENT DATE:	29 April 2002
PARTIES :	Leon Gregor and Trevor Baker (P) British-Israel-World Federation New South Wales Branch (D)
JUDGMENT OF:	Austin J

COUNSEL :	P J Kelso (Solicitor) (P) J Boyle (Solicitor) (D)
SOLICITORS:	Taylor Kelso (P) Boyle Associates (D)
CATCHWORDS:	CORPORATIONS - winding-up - just and equitable ground - competing claims for entitlement to manage corporation - break down of personal relations - surplus assets on winding-up pass to UK body, which will apply them to a new entity - winding-up order made
LEGISLATION CITED:	Corporations Act 2001 (Cth) ss 248A, 248D, 461, 462, 467, 1322
CASES CITED:	Baird v Lees 1924 SC 83 Belgiorno-Zegna v Exben Pty Ltd (2000) 35 ACSR 305 International Hospitality Concepts v National Marketing Concepts (No 2) (1994) 13 ACSR 369 Loch v John Blackwood Ltd [1924] AC 783 Mitropoulos v Greek Orthodox Church (1993) 10 ACSR 134 Re Kurilpa Protestant Hall Ltd [1946] St R Qld 170 Re-Westbourne Galleries Ltd [1973] AC 360
DECISION:	Winding-up order made