Healy v The Real Estate Institute of Western Australia Incorporated - [2003] WASCA 32

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: HEALY & ORS -v- THE REAL ESTATE INSTITUTE OF WESTERN AUSTRALIA INCORPORATED [2003] WASCA 32

CORAM: MURRAY J
ANDERSON J
STEYTLER J

HEARD: 10 FEBRUARY 2003

DELIVERED : 7 MARCH 2003

FILE NO/S: FUL 110 of 2002

BETWEEN: MAXWELL RAYMOND HEALY
First Applicant
JENNIFER ANNE STAGEMAN
Second Applicant
COUNTRY AND METRO REAL ESTATE PTY LTD (ACN 084 788 563)
Third Applicant
AND
THE REAL ESTATE INSTITUTE OF WESTERN AUSTRALIA INCORPORATED
Respondent

Catchwords:

Appeal - Practice and procedure - Pleadings - Application for leave to appeal against decision of Master to strike out part of Reply - Turns on own facts

Legislation:

Associations Incorporation Act 1987

Result:

Application for leave to appeal allowed
Appeal upheld to the extent of reinstating par 11(a) of Reply

Category: B

Representation:

Counsel:

First Applicant              :     Mr M J McPhee
Second Applicant          :     Mr M J McPhee
Third Applicant            :     Mr M J McPhee
Respondent:     Mr G R Donaldson

Solicitors:

First Applicant              :     Michell Sillar McPhee
Second Applicant          :     Michell Sillar McPhee
Third Applicant            :     Michell Sillar McPhee
Respondent:     McCallum Donovan Sweeney

Case(s) referred to in judgment(s):

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125.
Wilson v Metaxas [1989] WAR 285.

Case(s) also cited:

Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656
Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399
Baily v British Equitable Assurance Co [1904] 1 Ch 374
Buckley v Tutty (1971) 125 CLR 353
Calvin v Carr [1980] AC 574
Cameron v Hogan (1934) 51 CLR 358
Chiropractic & Osteopathic College of SA Inc v Struthers (1981) 97 LSJS 49
Clarke v ALP (SA Branch), Hurley & Ors & Brown (1999) 74 SASR 109
Dixon v Esperance Bay Turf Club (Inc) [2002] WASC 110
Gambotto v WCP Ltd (1995) 182 CLR 432
Gra-Ham Australia Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65
Harbottle Brown & Co Pty Ltd v Halstead [1968] 3 NSWR 493
Harris v Harris [1952] 1 All ER 401
In the matter of the duty on the Estate of the New University Club (1887) QBD 720
John v Rees [1970] Ch 345
Nurses Memorial Centre of South Australia Inc v Beaumont (1987) 44 SASR 454
Peters' American Delicacy Co Ltd v Heath (1939) 61 CLR 457
Rush v WA Amateur Football Club League (Inc) [2001] WASC 154
Russell v Duke of Norfolk [1949] 1 All ER 109
Woodford v Smith [1970] 1 WLR 806

MURRAY J: I have read the reasons for decision of Steytler J. I agree with them and with the orders he proposes. I have nothing to add.
ANDERSON J: I agree with the judgment of Steytler J. There is nothing I can usefully add.
STEYTLER J: This is an application for leave to appeal against the decision of a Master, whereby he struck out a paragraph of the Reply filed by the applicants (as plaintiffs) in proceedings brought by them against the respondent (as defendant).
The first and second applicants are licensed real estate agents. The third applicant is a company operating as a licensed real estate agent, under the management of the second applicant. The respondent, the Real Estate Institute of Western Australia Incorporated ("REIWA"), is an association incorporated in Western Australia under the Associations Incorporation Act 1987 ("the Act").
REIWA published rules for its governance in February 1986 ("the old rules"), as contemplated by s 13 of the Act. These rules were replaced by others ("the new rules") which, according to REIWA (par 4(b) of its Amended Defence), took effect from either 3 December 1998 or 15 September 1999.
The three applicants wished to join REIWA. They lodged applications accordingly, in about January 1999. Their applications were rejected. The applicants lodged an appeal against their rejection, relying upon the old rules, which, they contend, governed their application for membership. REIWA declined to embark upon that appeal, contending that, if the old rules are applicable, the appeals were lodged out of time and, if, as it submits to be the fact, the new rules are applicable, then the appeals are pointless because the applicants are anyway ineligible for membership under those rules. The applicants thereupon commenced an action against REIWA by which they sought a declaration that their appeals were validly brought and that any award made pursuant thereto will likewise be valid and will bind the parties.
The paragraph of the applicants' Reply which was struck out by the Master (par 11) was pleaded in response to pars 16(b) and 16(e) of REIWA's Amended Defence.
In pars 16(b), (c), (d) and (e) of its Amended Defence REIWA pleads that:

"(b)pursuant to the New Rules no person is eligible for membership of the Defendant if that person has been convicted of an indictable offence and any member convicted of an indictable offence shall ipso facto cease to be a member;
(c)the First Plaintiff [first applicant] was in 1995 tried and convicted, on indictment, of conspiracy to pervert the course of justice ('the Conviction');
(d)accordingly, pursuant to the New Rules even if the First Plaintiff was to be deemed a member at any time as and from 3 December 1998, alternatively as and from 15 September 1999, by reason of the Conviction the First Plaintiff shall instanter cease to be a member;
(e)accordingly, in respect of the First Plaintiff the declaration sought is purely theoretical, abstract and hypothetical."

Thereafter, in pars 16(f) and (g) of its Amended Defence, REIWA pleads that the third applicant is ineligible for membership because, under the new rules, no corporation is eligible for membership if a director of the corporation has been convicted of an indictable offence and the first applicant is and was at all material times a director of the third applicant. In par 16(i) it pleads that the second applicant, too, is ineligible because, under the new rules, no person is eligible for membership of REIWA unless that person is a director of a corporate member and the second applicant (who is a director of the third applicant) is not a director of a corporate member. It consequently pleads that the declaration sought is "purely theoretical, abstract and hypothetical" (par 16(h) and (k)) so far as the second and third applicants, also, are concerned.
The new rules relied upon in par 16(b) of the Amended Defence are Articles 30.1.2(d) and 39.1.1. As has been pleaded by REIWA, Article 30.1.2(d) provides, in effect, that no person shall be eligible for membership of REIWA if that person has been convicted of an indictable offence. Article 39.1.1, to which I shall refer again below, provides that a member shall cease to be so upon "ceasing to hold" the qualifications for membership stipulated in Article 30.1. The new rules relied upon in pars 16(f), (g) and (i) are Articles 30.2.1 and 30.2.2(a). There was no direct equivalent of any of those Articles in the old rules. However, Article 30(b) of the old rules provided that no person would be eligible for membership of REIWA unless that person was of good character and good business reputation and Article 43(e) thereof provided that a member would cease to be such if "he shall cease to be qualified within the terms of these Rules".
Paragraph 11 of the Reply, which, as I have said, is expressed to have been pleaded in answer to pars 16(b) and (e) of the Amended Defence, reads as follows:
"11.In further Reply to paragraphs 16(b) and 16(e) of the Amended Defence the Plaintiffs say as follows:
(a)The proper construction of the New Rules relating to the cessation of membership (Article 39) and expulsion of members (Article 41) results in such articles having no application to the Plaintiffs or any of them in the event of their Appeal to the arbitration being successful because:
(i)the First Plaintiff would have been admitted to membership in circumstances where the criteria for membership were those under the provisions of the Old Rules namely, notwithstanding the disclosed existence, then, of a conviction for an indictable offence the First Plaintiff will have been considered to be a person of 'good character and business reputation'.
(ii)the First Plaintiff will have had the conviction at all material times and would thus not fall within the provisions in Articles 39 or 41 of the New Rules which require the person concerned to have 'ceased to hold' the qualifications stipulated in Article 30.1 as being required for membership (per Article 39) or is a person who 'no longer holds' the qualifications stipulated in Article 30.1 as being required for membership (per Article 41); because the Plaintiff will have at all material times had the conviction and could not have 'ceased to have' such conviction nor will it be able to be said of him that he 'no longer has no conviction';
(iii)in any event such Rules will not apply to the Second Plaintiff who has never had such a conviction.
(b)Alternatively, and in any event, if the Plaintiffs [sic] Appeal before the Arbitrator is successful and as a result the Plaintiffs or any of them are admitted to membership of the Defendant and a question then arose as to the applicability of Articles 39 and 41 of the New Rules to the Plaintiffs or any of them once they have been admitted to membership (as pleaded in paragraph 16(b) and (d) of the Defence) it will be implied into the terms of those Articles that may then be the basis of legal relations between the Plaintiffs and the Defendant that a person said to be caught by such provisions will have received the conviction after being admitted to membership, so that on the normal meaning of the words in Articles 39 or 41 of the New Rules such a person will have 'ceased' to hold the qualification of not having such a conviction or 'no longer hold' that qualification. Accordingly such articles will have no application to any of the Plaintiffs so as to affect their membership, ipso facto, instanter or otherwise.
(c)Such an implication will arise between members and the association because the implication:
(i)is reasonable and equitable;
(ii)is necessary to give business efficacy to the contract;
(iii)is so obvious that 'it goes without saying';
(iv)is capable of clear expression; and
(v)it does not contradict any express term of the Rules."
The reference to Article 41, in pars 11(a) and (b) of the Reply, appears to have been unnecessary, REIWA not having relied upon the right of expulsion in par 16(b) of its Amended Defence. Article 39(1), also referred to in pars 11(a) and (b), reads, in full, as follows:
"39.1A member shall cease to be a member of the Institute upon:
39.1.1The member ceasing to hold the qualifications stipulated in Article 30.1 as being required for membership;
39.1.2The member ceasing to hold the qualifications stipulated in Article 30.2 as being required for membership of that member's particular class of membership;
39.1.3The member dying;
39.1.4The lapsing of Corporate Membership pursuant to the provisions of Article 35;
39.1.5The member resigning pursuant to the provisions of Article 40; or
39.1.6The member ceasing to be a member pursuant to the provisions of Articles 41 or 42."
REIWA applied to strike out par 11 of the Reply upon the basis that what was there pleaded was manifestly groundless (see General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129). The Master upheld that contention. He said [26] that the words "ceasing to hold" in article 39.1.1 were arguably prospective in their operation (as counsel for the applicants had contended) in the sense that "they refer to a member who, in the future, ceases to hold, or no longer holds, the qualification" and that the applicants had an argument that, as the first applicant "had his disqualifying conviction for an indictable offence prior to his membership (if he gets membership as a result of the appeal) … [article 39 did] not apply to him". However, he went on to say (ibid) that the argument was "very technical" and one which should not be accepted "because the rules must be read as a whole". He said, in this last respect, that article 39 must be read with article 30.1 which clearly provides that no person shall be eligible for membership of REIWA if he "has been convicted of an indictable offence". He went on to say [26] and [27]:
"In the absence of a carry‑over provision in the new rules providing that a member of REIWA under the old rules is automatically deemed to be a member under the new rules - and there is no such provision - I consider the plaintiffs' plea in par 11(a) of the reply is not arguable.
I also consider that the implied term pleaded in pars 11(b) and (c) of the reply is not arguable. It contradicts the express term of article 30.1, that a person convicted of an indictable offence is not eligible for membership."
He ordered that the whole of par 11 should be struck out.
The applicants contend, by their grounds of appeal, that the contention advanced by them in par 11(a) is arguable, in that the words "ceasing to hold" are to be read prospectively, "so that a person who is admitted under the Old Rules would continue to be a member under the New Rules". The applicants also contend that it is arguable that a term is to be implied as contended for in pars 11(b) and (c).
As the applicants' argument emerged during the course of the hearing of the appeal, it came down to two propositions. The first is that, at the time of the lodgment of their application for membership of REIWA, there came into being a contract between the applicants and REIWA whereby REIWA agreed that the applicants' application would, in each case, be considered under and subject to the then existing rules, being the old rules. The second is that, when their application was wrongly refused (as they contend it was) by reference to a criterion which emerged only under the new rules (the ineligibility of a person who has been convicted of an indictable offence), they were given, by the old rules, a right of appeal which they have sought to exercise and which, if their appeal should succeed, will result in their being accepted as members.
The difficulty with this argument is that it has not been pleaded with any clarity, insofar as it has been pleaded at all. In par 8 of their Statement of Claim, the applicants plead as follows:
"By the terms of the application for membership published by the Defendant which was executed by the Plaintiffs on or about 25 July 1999 and delivered to the Defendant on or about the said date with the prescribed nomination fee the Plaintiffs became bound (as did the Defendant by its acceptance of the said forms and nomination fee paid by the Plaintiffs) by the rules, code of ethics and directions of the Council of the Defendant in so far as same applied to the Plaintiffs; and in relation to the application by the Plaintiffs for membership of the Defendant, including the rules of the Defendant providing for appeals against an adverse decision in relation to the applications by the Plaintiffs for membership of the Defendant."
Then, in par 9, they plead that:
"By rule 87 of the said Rules provisions is [sic] made for a right of appeal against such an adverse decision is provided [sic] as follows:
87.Right of Appeal
(a)Any person aggrieved by a decision or recommendation of the Council, Executive Committee, an Arbitration Committee, a Special Committee or an Appeals Committee as defined in Rule 3 of these Rules may appeal against any such decision or recommendation to either:
(i)The Board of Management of the Real Estate Institute of Western Australia as defined in Rule 3 of these Rules, or
(ii)An Independent Arbitrator appointed by the President for the time being of the Institute of Arbitrators (Western Australian Chapter), such appointment and arbitration to be in accordance with and subject to the Institute of Arbitrators (Australia) Rules for the Conduct of Commercial Arbitrations.
(b)The reference of any complaint or dispute shall be in accordance with the Institute's Rules of Practice."
In pars 10 and 11 they plead that, in or about January 1999, each of them applied for membership of REIWA by lodging the prescribed form, duly executed, and a nomination fee. In par 12 they plead that, on about 26 March 1999, REIWA rejected their applications for membership. In par 13 they plead that they have, under article 87, sought and obtained the nomination of a barrister, Mr C D Raymond, to act as arbitrator between them and REIWA "in an appeal by … [them] against the refusal by … [REIWA] to admit … [them] as members of … [REIWA]". In par 14 they plead that REIWA has "raised questions of law" as to the ability of the applicants to nominate Mr Raymond as arbitrator and has advised them that it will refuse, in any event, to recognise any award that may be made by Mr Raymond pursuant to the arbitration. Finally, in par 15, they plead that, for them to proceed with the arbitration and then find that the arbitrator "was without jurisdiction in any event", would cause them loss and damage. I have mentioned that they go on to seek a declaration that Mr Raymond's appointment is valid and that any award by him will be valid and binding on the parties.
There is nowhere any plea that REIWA's refusal of the applicants' application for membership was wrongly made in breach of the contract said to have been made between the applicants and REIWA if, as seems to be the case, par 8 of the statement of claim was intended to plead that, on 25 July 1999, such a contract came into being. Nor do the terms of that contract emerge from the pleading with any clarity at all, although, in par 8(f) of the Reply, the applicants plead that:
"(f)… the Plaintiffs say the applications for membership with the payment of the application fees (together with the acceptance of the fees by the Defendant) created binding legal relations between the Plaintiffs and the Defendant relevant to each of the Plaintiffs' applications for membership and such legal relations included the obligation of the Defendant to determine the applications pursuant to the then applicable Rules, namely the Old Rules and if (which is not admitted) in September 1999 the New Rules of the Defendant became valid and applicable the change did not affect the Plaintiffs [sic] pre‑existing rights to Appeal to an independent arbitrator pursuant to Rule 87 of the Old Rules which were applicable when their applications for membership were made and when those applications were refused."
The effect of this plea seems to be that the contract (presumably intended to be referred to by the words "binding legal relations") between the applicants and REIWA was such that the applicants' applications were required to be determined under the criteria fixed by the old rules, being the rules which then applied.
Even if these pleadings are read generously, the case now sought to be made does not, in my opinion, sufficiently emerge from them. I have said that there is no plea, even, that the refusal of the applications was made in breach of the contract to which reference has, somewhat obliquely, been made in par 8 of the Statement of Claim and in par 8(f) of the Reply. Nor, in my opinion, is there anything in the applicant's pleadings, as they stand, which sufficiently supports the contention that, notwithstanding the rule changes, any reconsideration of the applicants' application for membership as a result of a successful appeal is required to be made under the eligibility criteria provided for under the old rules, and that the applicants can still be admitted under those rules, notwithstanding that they are still not members of REIWA and cannot satisfy the eligibility criteria provided for by the new rules.

Be all of this as it may, the fact is that the applicants have sought to make a case only as regards their entitlement to the declaration sought by them, being, as I have said, one to the effect that Mr Raymond's appointment as arbitrator is valid and that any award by him will be valid and binding on the parties, and the sole issue which was ventilated before, and decided by, the Master was, so far as is relevant, that relating to the proper construction of Article 39.1.1, in its context in the new rules. I will consequently restrict myself to that issue.
In my opinion, par 11(a) does raise an arguable case, such that the construction of Article 39.1.1 there pleaded cannot be described as "manifestly groundless". It seems to me to be reasonably arguable that the natural meaning of the words used in Article 39.1.1 is that, in a case in which an existing member ceased to meet the eligibility criteria for membership as a result of an event which occurred after being admitted to membership, that person would cease to be a member, but that the provision is not intended to apply to those who were admitted under the old rules and in respect of whom there has been no subsequent disqualifying event. Such a person would never have held the qualification referred to and accordingly could not be said to have "ceased" to hold it.
Counsel for REIWA pointed out that this construction would lead to the result that some persons would remain members of REIWA who would not have been eligible to be so if their applications had been made after the new rules took effect. While that is undoubtedly so, it is at least arguable that this consequence is not so unreasonable or absurd that it could never have been intended. Counsel for REIWA also raised the case of a member who, while being ineligible for membership under the new rules because of his conviction of an indictable offence, obtains membership by means of concealment of the conviction. Arguably, however, the membership of such a person would, on ordinary principles, be liable to be set aside by virtue of the deliberate failure to disclose the conviction, no matter which construction of Article 39.1.1 is preferred.
Some mention was also made of Article 41.1(a) of the new rules, which provides that a member "may be expelled or suspended from REIWA if its Council or Executive Committee should determine that the member no longer holds the qualifications stipulated in Article 30.1 as being required for membership". Leaving aside the fact that the notion of suspension, in such a case, appears to be inconsistent with Article 39.1.1, the words "no longer holds" seem to me also arguably to convey that, when admitted to membership, the person concerned did hold the qualification referred to but has since ceased to do so, and not to relate to a person who was admitted to membership when no such qualification was required (and who consequently never held that qualification) and who has not since been the subject of a disqualifying event. Such a person could not be said "no longer" to hold the stipulated qualification. It is also arguable that, had the intention been otherwise, it would have been a simple enough matter to make this clear, for example, by providing that no member of REIWA may remain as such if shown to have been convicted of an indictable offence, no matter when that conviction occurred.
As I have mentioned, the Master considered it to be arguable that the words "ceasing to hold" should be read in the sense contended for on behalf of the applicants. His decision to strike out par 11 was based upon the absence of a "carry‑over provision" in the new rules "providing that a member of REIWA under the old rules is automatically deemed to be a member under the new rules". With due respect, it seems to me to be fairly arguable that it is implicit in the adoption of the new rules that a person who was admitted to membership of REIWA under the old rules is still to be a member, notwithstanding the adoption of the new rules, but subject to the occurrence of any subsequent disqualifying event provided for by the new rules.
As to pars 11(b) and (c), it seems to me that those paragraphs (insofar as I am able to understand them) add nothing at all to what is pleaded in par 11(a) (which, I should say, is somewhat argumentative in its terms) and counsel for the applicants did not press for their retention with any real enthusiasm. In my opinion, they were rightly struck out.
It consequently seems to me that the application for leave to appeal should be allowed (as to which see Wilson v Metaxas [1989] WAR 285 at 294) and that the appeal should be upheld, albeit only to the extent of reinstating par 11(a) of the Reply.