Howie v Royal New South Wales Canine Council Limited - [2006] NSWSC 565

No judgment structure available for this case.

CITATION: Howie v Royal New South Wales Canine Council Limited [2006] NSWSC 565

HEARING DATE(S): 07/06/06

JUDGMENT DATE :
14 June 2006

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Plaintiff's claim for declaration that he has been elected dismissed

CATCHWORDS: CORPORATIONS - directors - election of directors - certain directors required to retire at annual general meeting - procedures for election - whether election occurs when ballot (or default procedure) completed or when vacancy to be filled arises by retirement - deadline for nominations - fixing by board - whether board has power to fix second or subsequent deadline - turns on particular provisions not commonly encountered in company constitutions - no question of principle

LEGISLATION CITED: Interpretation Act 1987, s.48(1)

CASES CITED: Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 12 ACLR 118
Ditcher v Denison (1856) 11 Moore PC 325
North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146

PARTIES: Garry John Howie - Plaintiff
Royal New South Wales Canine Council Limited - Defendant

FILE NUMBER(S): SC 2731/06

COUNSEL: Mr L.J. Ellison SC - Plaintiff
Mr G. Lucarelli - Defendant

SOLICITORS: G.M. Ellison & Co - Plaintiff
Gilbert + Tobin - Defendant

- 15 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY, 14 JUNE 2006

2731/06 GARRY JOHN HOWIE v ROYAL NEW SOUTH WALES CANINE COUNCIL LIMITED

JUDGMENT

1 The facts are not in dispute and may be stated briefly. The defendant is a company limited by guarantee the objects of which are concerned with the pursuits of breeding and exhibiting of purebred dogs. The constitution of the defendant contains, in the usual way, provisions concerning the composition of its board of directors and the processes by which persons come to be directors and cease to be directors.

2 The defendant regularly issues to its members a publication called “Canine Journal”. The February 2006 issue of that journal contained a notice calling for nominations of members for election to certain positions on the board of directors. The notice specified 3 pm on 3 March 2006 as the time by which nominations were to be lodged. Two nominations were lodged before that time in respect of one of the positions in question (“Director, Metropolitan Region”), being a nomination of the plaintiff and a nomination of Ms Davis. Ms Davis was already in office as a Metropolitan Region director but was subject to retirement under the constitution. Her nomination was accordingly a nomination for re-election. Ms Davis died on 9 April 2006. Subsequently, the defendant took steps, in accordance with a resolution of its board of directors passed on 12 April 2006, to call again through the “Canine Journal” for nominations for election to the position of Director, Metropolitan Region. A second notice was published. It referred to the situation that had arisen with respect to Ms Davis and said:

“Under the circumstances, the Board has decided to reopen nominations for the 2006 Board of Directors Election for the Metropolitan Region. Previous nominees will not need to renominate. Their nomination will still stand.

Members seeking selection will be required to reside in the Metropolitan Region and will also be required to be a financial member of RNSWCC. It will also be necessary to be nominated by two (2) financial members of RNSWCC who also must reside in the Metropolitan Region.

[email protected]

3 By his summons filed on 15 May 2006, the plaintiff claims the following relief:

“1. A Declaration the Defendant’s resolution passed 12 April 2006 purporting to reopen nominations for the position of Director (Metropolitan Region) is invalid.

2. A Declaration the re-opening of nominations by the Defendant for the Board of Directors Election 2006 Metropolitan Region and all actions consequential thereupon are invalid.

3. A Declaration GARRY JOHN HOWIE is elected to the position of Director Metropolitan Region of the Defendant.”

4 It is necessary to set out certain provisions of the defendant’s constitution:

Powers of the Board of Directors

29. (a) At the 1994 annual general meeting of RNSWCC those Directors who were elected to the Management Committee of the Association in 1991 shall retire from office.

shall retire from office.
(e) a retiring Director is eligible for re-election.

Election of Board of Directors

(d) Nominations shall be delivered to the Secretary on or before a date to be determined from time to time, twenty eight (28) days’ notice of which shall be published in the journal.

32. (a) For the purpose of determining member representation on the Board of Directors, the State shall be divided into 6 regions (or such other number of regions having boundaries as determined by a special resolution of the members passed in general meeting). The boundaries listed in the regulations as at the date of adoption of these Articles shall be the boundaries of the 6 regions until otherwise determined by a special resolution of the members passed in general meeting;
(b) The regions, the component parts of which appear in the regulations and their entitlement to representation on the Board of Directors shall be:

Metropolitan Region - 8 Representatives
Illawarra and South Eastern Region - 2 Representatives
Hunter Region - 2 Representatives
Western Region - 1 Representative
Northern Region - 1 Representative
Southern Region - 1 Representative

33. A member who is a candidate for election to the Board of Directors must, at the point in time of such election, (including deemed election under Article 36) usually reside in the region appearing on the member’s nomination form.

In the event of non compliance with this Article, there shall be a casual vacancy.

34. If insufficient nominations are received to fill all vacancies on the Board of Directors, the candidates nominated shall be deemed to be elected.

35. Any vacant positions on the Board of Directors shall be deemed to be casual vacancies.

36. If the number of nominations received from within a region is equal to the number of vacancies to be filled, the persons nominated shall be deemed to be elected.

37. If the number of nominations received exceeds the number of vacancies to be filled, a ballot shall be held.

…

Casual Vacancies

(i) has for a period of no less than 3 consecutive months not resided in the region he was elected to represent.

…

Annual General Meetings – Holding of
60. RNSWCC shall, at least once in each calendar year and within the period of 5 months after the expiration of each financial year of RNSWCC, convene an annual general meeting of its members.

Annual General Meetings – Calling of and business at

5 Against the background of these provisions, I should refer to some additional matters which are not in dispute. The financial year of the defendant is the year ending on 30 June. Having regard to article 60 of the constitution, annual general meetings are usually held in November. As I have noted, Ms Davis was, immediately before her death, in office as a director, holding one of the eight Metropolitan Region director positions referred to in article 32(b). Assuming that no-one is elected under article 30 (dealing with casual vacancies) before the November 2006 annual general meeting to fill a Metropolitan Region casual vacancy on the board of directors, article 29(d) will not operate at that meeting upon or in relation to any director “representing” the Metropolitan Region. Had Ms Davis been in office at the time of that annual general meeting, however, article 29(d)(i) would then have operated upon or in relation to her.

6 The constitution contemplates two situations in which a vacancy on the board of directors may be filled by election. Although no provision seems actually to say so, the electors are the members of the defendant, it being implied that voting rights for those purposes are those specified in article 69(a) in respect of a question arising at a general meeting, so that each member has one vote. The first situation in which an election is envisaged is where a casual vacancy occurs in the board of directors: see article 30. I shall have more to say about that presently. The other situation is not identified by express words but must be taken to be where a vacancy occurs because of retirement in accordance with article 29(d), that is, where a person retires as a director at an annual general meeting. I should explain why I say this.

7 Given the reference to 30 June in article 38(a), it must be contemplated that a vacancy that will, in the ordinary course, arise pursuant to article 29(d) at the annual general meeting held within five months after the end of a financial year ending on a particular 30 June will be filled by a person who is, before that meeting, chosen by the means provided for by articles 34 to 38(b). This is, I think, reinforced by the fact that the business of an annual general meeting, as prescribed by article 61, does not include the election of directors. It is thus made clear that processes undertaken separately and apart from such a meeting will identify the person who are to fill any vacancy occurring by retirement at the meeting. The intention could conceivably be that a ballot should be conducted after the vacancy had actually occurred, that is, after the annual general meeting. But the fact that, under such a system, the relevant office would continue vacant for some time supports the alternative construction, namely, that any ballot is to be conducted before the meeting, it being clear in advance, on the basis of article 29(d), which directors will then retire. That alternative construction is, as I have said, also consistent with the reference to 30 June in article 38(a) and the link created by article 60 between a financial year (which, under present arrangements, ends on 30 June) and an annual general meeting.

8 Each of articles 34, 36 and 37 operates according to an outcome with respect to the number of nominations “received”. If the outcome is as described in article 34, “the candidates nominated shall be deemed to be elected”. If the outcome is as described in article 36, “the persons nominated shall be deemed to be elected”. If the outcome is as described in article 37, “a ballot shall be held”. In each case, it is necessary to ascertain the number of nominations “received” in order to know whether the particular provision operates.

9 Determination of the number of nominations “received” can, of course, be made only by reference to a particular point in time. None of the articles in question identifies a time to which regard is to be had. It is the contention of the plaintiff that the time in question is the deadline determined in accordance with article 31(d); and that only one such deadline may be so determined.

10 The defendant accepts that the question of the number of nominations “received” is to be answered by reference to the deadline determined in accordance with article 31(d). But the defendant contends that it is permissible, as a matter of abstract power, for several dates to be determined in succession pursuant to article 31(d) and that, where that happens, the nominations “received” are to be ascertained after the latest of the dates. A corollary of this is that it is not possible to be sure that no further nominations will be “received” until there is no longer any possibility that a further deadline will be fixed.

11 I pause at the point to observe that, even if the plaintiff’s contention is correct (so that regard can be had, for the purposes of articles 34, 36 and 37, only to nominations received not later than the originally specified closing date), the plaintiff will not thereby have established an entitlement to the relief claimed in paragraph 3 of the summons. If there was one Metropolitan Region position available to be filled as a result of retirement at the annual general meeting and there were two candidates, the situation would be one governed by article 37, that is, where the number of nominations received by the deadline exceeded the number of vacancies to be filled; so that, in obedience to article 37 “a ballot shall be held”. The requirement that a ballot be held would not be overtaken by the death or withdrawal of one of the candidates. It is, of course, meaningful to speak of a “ballot” for “election” even where there is only one candidate. Election, of its nature, connotes a positive choice by electors in circumstances where each elector has an opportunity to vote for or against the proposition that a person should be installed in a position or office. If there were ultimately only one candidate and every elector expressed a negative opinion in respect of the single candidate, he or she would not be elected. There can be no deemed election or election by default except as the applicable rules expressly provide.

12 Mr Ellison SC, who appeared for the plaintiff, acknowledged this difficulty with his client’s case as advanced in the summons. Without opposition from the defendant, however, he indicated that the claim in paragraph 3 should be understood to include a claim, in the alternative, for a declaration that, in the events which have happened, the plaintiff is the only person qualified to be considered for election by ballot to the office of Director, Metropolitan Region.

13 The main question debated before me is whether article 31(d), insofar as it contemplates and permits determination of a date by which nominations are to be delivered to the secretary, has a “once and for all” operation so that, once a date is so determined, no other date can thereafter be determined; or whether there can be a second determination which has the effect of causing to be valid and regular any additional nominations received after the date originally determined and notified but not later than the date subsequently determined and notified.

14 Mr Lucarelli of counsel submitted on behalf of the defendant that the power of making determinations under article 31(d) is a power exercisable by the board of directors. Having regard to articles 27(a) and (b), that must be so. I did not understand Mr Ellison to submit otherwise. The power is accordingly a power to be exercised for a proper purpose and in accordance with legal principles governing all decision-making by company directors. But those considerations, while they may affect the propriety of a particular exercise of the power, say nothing about its scope and content. They must be determined as a matter of construction.

15 Mr Lucarelli placed particular emphasis on the words “from time to time” in article 31(d). He made the point that article 31(d) is concerned with delivery of nominations for a particular election. It follows, in his submission, that where, as here, a particular office is to be filled, persons who are to be candidates for election to that particular office must be nominated (by a document delivered to the secretary) by a date that is fixed in relation to and for the purposes of the election to that particular office. That being so, it is said, the words “from time to time” are not synonymous with “from election to election” and are, as regards a particular election, inconsistent with the “once and for all” construction for which the plaintiff contends. If a date can be “determined from time to time” in relation to and for the purposes of one particular event or procedure, it must be permissible, according to the defendant, for the person charged with the task of determining to undertake several successive acts of determination. Otherwise, the words “from time to time” would be denied meaning and effect; and this would be contrary to the well-known principle that the reader of a legal document should not, without “necessity or some sound reason” impute to its language “tautology or superfluity”: Ditcher v Denison (1856) 11 Moore PC 325 at p.337.

16 Mr Lucarelli sought to bolster this argument by reference to article 2(a)(ii) which says that the provisions of the Interpretation Act 1987 apply to and in respect of the constitution in the same manner as those provisions would apply if the articles were an instrument under that Act. He then referred to s.48(1) of that Act:

“If an Act or instrument confers or imposes a function on any person or body, the function may be exercised (or, in the case of a duty, shall be performed) from time to time as occasion requires.”

17 I do not think that resort to this statutory provision advances the arguments Mr Lucarelli seeks to make. The particular provision of the articles (article 31(d)) uses the words “from time to time”, thus making it clear, as a matter of the express language, that the power or function in question (being a power or function referable to a particular election) may be exercised at intervals. It adds nothing, in my view, to say that it may be exercised at intervals “as occasion requires”. Of its nature, the power or function could not properly be exercised unless some occasion for its exercise had arisen. And, having regard to the observations of members of the High Court in North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146 to which Mr Lucarelli took me, it must, I think, be accepted that where there is an express power to act “from time to time”, there is a duty upon the person in whom the power reposes to exercise the power as and when occasion demands and therefore to consider whether an occasion for its subsequent exercise has arisen.

18 I am satisfied that, as a matter of abstract power, article 31(d) permits a second or subsequent deadline for nominations for a particular election to be set by the board. To hold otherwise would be to overlook and ignore the words “from time to time” which, as I have said, appear in a provision concerned with a particular election.

19 The words “from time to time” and the availability of the power to be exercised on successive occasions in relation to a particular election are things which seem to me to have in contemplation several unspoken possibilities. One would be where, by the deadline originally fixed, there had been no nominations. The construction I consider to be correct would enable the board, in such a case, to go back to the members again and to encourage them to take steps directed towards avoiding a situation where a vacancy continued after the annual general meeting (I need express no opinion on the question whether such a vacancy could later be filled as a deemed casual vacancy under article 35). Another possibility is that a number of persons greater than the number of vacancies is nominated before the original deadline but all later die, cease to be eligible for election or withdraw their consents to be candidates. Again, the board might wish to give the membership a renewed opportunity to put forward candidates. A third possibility is that there are two nominees for one position, with each coming from a particular section or interest group within the membership making it possible to conclude that each candidate “represents” a particular “party”. It may be open to the board to form a view that, if one such candidate later withdrew, the prospects of obtaining a fair and just reflection of members’ wishes upon the ballot would be enhanced by calling again for nominations and fixing a new deadline. If such a view were properly formed, the power to fix a new deadline would be available to be exercised.

20 As Mr Lucarelli observed, a board of directors is not required to stand studiously aloof from all matters concerning its own composition. It must not, however, exercise its powers or the powers of the company in a way calculated to promote only “a question of personality and not relevant to corporate policy”, to quote words used by Kirby P in Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 12 ACLR 118 at p.137. Directors must, as Mahoney JA said in the same case (at p.146), “act in respect of the election for the good of the [company] as a whole”, but must not act to secure a particular outcome in a board of election. Action to foster interest in the election and to provide opportunities for candidates to present themselves to the membership for consideration would prima facie be of the quality approved by Mahoney JA. I say “prima facie” because of a need to exclude the case where, under the guise of doing the things I have mentioned, directors are in reality descending into and taking sides in a political arena.

21 I do not lose sight of one issue of difficulty that may be seen to arise from the conclusion that it is open to the board, as a matter of power, to make and notify several successive determinations under article 31(d). It comes from what is said at paragraph [7] above and may be illustrated by an example. Assume that, by a date determined and notified under article 31(d), two persons have been nominated for two positions that are to become vacant under article 29(d) in respect of a particular region at the next annual general meeting. On one view of article 36, the deemed election of those two persons to fill the two vacancies would be complete once the notified closing date for nominations had passed. If that view is correct, subsequent action to determine and notify a second closing date would be impermissible because the matter of filling the vacancies would already have been concluded.

22 I do not consider that to be the correct approach to article 36 (or, for that matter, article 34). The filling of vacancies by election or deemed election under the provisions I am considering does not occur until the next annual general meeting. Before that, there is no vacancy to fill. While steps may have been taken in advance of the meeting which identify the persons to be elected, there can be no actual election to the position or office until it has been made available by retirement of the incumbent in accordance with the requirement to retire. The purpose of those steps is to determine who, if anyone, will be elected to the positions when they are vacant. A declaration under article 38(b) identifies the persons who are to fill the vacant positions when they are available.

23 The provisions with respect to the filling of casual vacancies – also a process involving election by members – proceed on a somewhat different footing which is to be contrasted with the situation just discussed. Calling of nominations under article 31 also plays a part in the process of filling casual vacancies. Article 30(d) makes it clear that “appointment” to a casual vacancy may occur “under paragraph (a) or (b) above” – that is, by deemed election where there is only one nominee or by ballot where there are several. In either such case, the office will accordingly be filled either by the circumstance that there is only one nominee or by the result of a ballot. Where a casual vacancy is being filled, it is, by definition, a vacancy that already exists at the first moment of the process directed towards filling it, as distinct from a vacancy that will not occur until a future annual general meeting. In those circumstances, the “appointment” envisaged by article 30(d) must be taken to be immediate. In that context, it seems to me that the “from time to time” specification would allow a second or subsequent closing date for nominations to be fixed but only if the most recently fixed deadline had not arrived at the time of the subsequent fixing.

24 I pause at this point to note a point of crucial importance to the actual outcome of this case. Had Ms Davis still been living at the time of the annual general meeting expected to occur in November 2006, she would then have retired in accordance with article 29(d)(i). It is accepted that, unless someone were appointed to a casual vacancy caused by the departure of some other Metropolitan Region director between now and that meeting (so as to come within article 29(d)(ii)), Ms Davis would have been the only Metropolitan Region director to retire at the November 2006 annual general meeting. As things now stand, however, Ms Davis, for obvious reasons, will not retire (or be required to retire) at that annual general meeting. Nor will any other Metropolitan Region director be required to retire at the meeting.

25 It follows from this that, at and in the context of the November 2006 annual general meeting, there will be no vacancy in the ranks of the Metropolitan Region directors of the second kind referred to in paragraph [6] above, that is, a vacancy occurring because of article 29(d). There now exists (and has existed since 9 April 2006) a casual vacancy caused by Ms Davis’s death: see article 42(a). That vacancy may be filled pursuant to article 30. But the call for nominations published in the “Canine Journal” in February 2006 which resulted in the nominations of the plaintiff and Ms Davis does not define the group from which a person to fill the casual vacancy may be drawn. This is because article 30 permits a call for nominations only “to fill the casual vacancy” and may be resorted to only “[i]n the event of a casual vacancy occurring on the Board of Directors”. The notice in the February 2006 journal appeared before the casual vacancy arose by reason of Ms Davis’s death and cannot be regarded as related to that casual vacancy in any way.

26 Nor is the subsequent notice in the journal (that is, the notice quoted in part at paragraph [2] above) a notice that relates to, and seeks nominations to fill, the casual vacancy caused by Ms Davis’s death. That notice refers expressly to “the 2006 Board of Directors Election for the Metropolitan Region”, making it clear (by use of the word “reopen”) that it is concerned with the filling of the office for which nominations were first called by the notice in the February journal when Ms Davis was still living. That office, obviously enough, is not a casual vacancy arising by reason of Ms Davis’s death. The statement that previous nominees will not need to renominate and that a previous nomination will stand confirms that a nomination made before the death of Ms Davis will be recognised. This is another reason why any such nomination cannot relate to the casual vacancy.

27 As things now stand, therefore, a nomination made or purportedly made in response to either the notice in the February 2006 journal or the subsequent notice extracted at paragraph [2] above cannot support election to either the casual vacancy caused by Ms Davis’s death or a vacancy in the office of Metropolitan Region director arising by reason of retirement at the November 2006 annual general meeting. Neither notice will support election on the first basis because it is not a notice given in the “event” referred to in article 30 which invites nominations to fill the casual vacancy. Rather, each is, in terms, a notice that invites nominations in relation to the annual election for 2006. Neither notice will support election on the second basis because there will be no vacancy arising by retirement of a Metropolitan Region director at the 2006 annual general meeting that is available to be filled by election or deemed election.

28 In the result, therefore, while the defendant has successfully argued that a second or subsequent call for nominations may be made under article 31(d), the position is that the second notice extracted at paragraph [2] is of no efficacy in the particular circumstances. As regards the plaintiff’s claims (see paragraph [3] above), I am not sure that it is correct to say that the actions in paragraphs 1 and 2 of the sums are “invalid”. Rather, they are now ineffective to produce any meaningful result under the constitution. More particularly and more significantly, the plaintiff has not made out his claim for the real relief he seeks, being the declaration in paragraph 3 of the summons or the variant of it referred to at paragraph [12] above.

29 The claim in paragraph 3 of the summons will accordingly be dismissed and there will be no declaration to the alternative effect referred to at paragraph [12] above. I doubt that declarations in terms of paragraphs 1 and 2 will be either appropriate or useful in light of my conclusions, but I shall hear argument on that matter if a party desires.

30 Since neither party can really be said to have enjoyed overall success (in the sense that the plaintiff’s lack of success did not result from the acceptance by the court of the contentions advanced by the defendant), I am inclined to think that there should be no order as to costs. I shall, however, hear submissions on costs if either party wishes.

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Citations

Howie v Royal New South Wales Canine Council Limited [2006] NSWSC 565

Cases Citing This Decision

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Cases Cited

3

Statutory Material Cited

1

In re Judiciary and Navigation Acts [1921] HCA 20

Australian Securities and Investments Commission v Vines [2005] NSWSC 738

CITATION:	Howie v Royal New South Wales Canine Council Limited [2006] NSWSC 565
HEARING DATE(S):	07/06/06
JUDGMENT DATE :	14 June 2006
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Plaintiff's claim for declaration that he has been elected dismissed
CATCHWORDS:	CORPORATIONS - directors - election of directors - certain directors required to retire at annual general meeting - procedures for election - whether election occurs when ballot (or default procedure) completed or when vacancy to be filled arises by retirement - deadline for nominations - fixing by board - whether board has power to fix second or subsequent deadline - turns on particular provisions not commonly encountered in company constitutions - no question of principle
LEGISLATION CITED:	Interpretation Act 1987, s.48(1)
CASES CITED:	Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 12 ACLR 118 Ditcher v Denison (1856) 11 Moore PC 325 North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146
PARTIES:	Garry John Howie - Plaintiff Royal New South Wales Canine Council Limited - Defendant
FILE NUMBER(S):	SC 2731/06
COUNSEL:	Mr L.J. Ellison SC - Plaintiff Mr G. Lucarelli - Defendant
SOLICITORS:	G.M. Ellison & Co - Plaintiff Gilbert + Tobin - Defendant