IMO Donkey Wheel Limited

IN THE SUPREME COURT OF VICTORIA

Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S CI 2016 01759

IN THE MATTER of DONKEY WHEEL LIMITED (ACN 109 045 650)

BETWEEN

DONKEY WHEEL LIMITED (ACN 109 045 650)	Plaintiff
v
MARK JONATHAN IRVING BRUNNER	Defendant

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JUDGE:	Randall AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	24, 25 August and 8 September 2016
DATE OF JUDGMENT:	11 August 2017
CASE MAY BE CITED AS:	IMO Donkey Wheel Limited
MEDIUM NEUTRAL CITATION:	[2017] VSC 462

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CORPORATIONS – Company limited by guarantee – Resignation as director – Requirement for writing – Membership – Directors resolving to admit to membership based upon the nomination or wishes of deceased member – Constitution provided for membership to cease on death – Constitution required that applicant for membership must be proposed by another member – Application for membership to be made in writing and signed by the applicant and his or her proposer – Proposal contained in will – Proposer deceased – Irregularity – Corporations Act 2001 (Cth), s 1322 – Validation.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S Anderson QC with Mr E Batrouney	Lewis Holdway Lawyers
For the Defendant	Mr M Borskey	AMC Law & Associates

HIS HONOUR:

Donkey Wheel

The plaintiff (‘Donkey Wheel’) is a not for profit company limited by guarantee. It was incorporated in 2004 for the purposes of acting as trustee for two charitable trusts: the Donkey Wheel Charitable Trust and the Donkey Wheel Fund. Each of those trusts was settled by the late John Henry Kilian Brunner in May and October 2004.

The Donkey Wheel special report for 2014/2015 describes Donkey Wheel in the following terms:

Established in Australia in 2004 for the purpose of philanthropic gifting, we are a charitable trust that tries to make a difference in the world through our investments. We believe that everything we do at Donkey Wheel is an investment. This includes the grants we make to fund programs, the time we spend to help develop organisations and investments where we expect a financial return.
As a small foundation we have funded local, national and international projects with a high potential to create significant positive change for modest grant amounts. We are an impact investor who seeks out opportunities to generate both financial and social returns with our resources. Our first impact investment was the purchase of Donkey Wheel House in 2008.
We have a passion for social change, constantly seeking ideas that move away from today’s problems and, instead, create a new world. We believe extraordinary change happens when people think differently – and that leaders of change (especially those working at grass roots level) need to be supported and nurtured so that their ideas can take root and flourish. We have therefore always sought passionate leaders with ideas that demonstrate a different way of thinking.

In describing the genesis of Donkey Wheel House, the report set out:

Claire was enthusiastic about creating a hub, a place where organisations could come together, share ideas, and learn skills to help them. She wanted Donkey Wheel to be a catalyst for a ‘communiversity’, and for that she would need space for workshops, and some office space that organisations could share.

ASIC Records

The ASIC company extract records the following as current company officers:

·David Piggott, appointed 12 November 2009

(also appointed secretary on 18 January 2016.)

·Elizabeth Saphyra Jennings

(appointed 6 August 2011)

·Colin Craig Duthie

(appointed 22 January 2015)

Former company officers are as follows:

·Michael Geoffrey Witt

(a director from 17 September 2008 to 18 January 2016)

·Claire Eliza Brunner

(A daughter of the late John Brunner. Was a director from the inception of Donkey Wheel until her death on 9 August 2015)

·Gordon Matthew Caris

(appointed 12 November 2009 and ceased on 12 June 2014)

·Nicholas Felix Minturn Brunner

(A son of the late John Brunner. Nicholas Brunner was injured in a kite surfing accident which left him unable to discharge his duties as a director. Nicholas was appointed on 12 May 2004 and ceased to be a director on 14 October 2013.)

·Mark Jonathon Irving Brunner (Jon Brunner)

(The defendant. A son of the late John Brunner) was appointed on 12 May 2004 and is recorded as ceasing to be a director on 30 June 2010.

There are a number of other former directors whom I will not list as they are not relevant to this consideration.
Donkey Wheel Register

The register of current and former members of Donkey Wheel sets out the following: Claire Brunner, Nicholas Brunner and Jon Brunner were all inaugural members; the membership entered on the register at 6 May 2004. Claire Brunner ceased to be a member upon her death on 9 August 2015. Nicholas Brunner ceased to be a member on 21 July 2014. On 22 September 2015, Jane Tewson is recorded as being entered on the register of members. Accordingly, the two current members are recorded as Jon Brunner and Jane Tewson.

The controversy

A dispute has arisen as to whether or not Jon Brunner resigned as a director of Donkey Wheel and whether or not Jane Tewson has been admitted to membership.

The originating process

The originating process seeks the following:

On the facts stated in the supporting affidavit of Elizabeth Anne Shalders sworn on 11 May 2016, the plaintiff seeks –
1.A declaration that Ms Jane Tewson is a member of Donkey Wheel Ltd or, in the alternative, an order pursuant to s 1322(4)(a) of the Corporations Act declaring that the admission of Ms Jane Tewson as a member of Donkey Wheel Ltd is not invalid by reason of any contravention of a provision of the Corporations Act or a provision of Donkey Wheel Ltd’s Constitution.
2.A declaration that the defendant [Mark Jonathan Irving Brunner] (‘Jon Brunner’) ceased to be a director of Donkey Wheel Ltd on 30 June 2010 or, in the alternative, an order pursuant to s 1322(4)(a) of the Corporations Act declaring that the lodgement of a Form 484 on 14 December 2010 notifying ASIC that the defendant ceased to be a director of Donkey Wheel Ltd on 30 June 2010 is not invalid by reason of any contravention of a provision of the Corporations Act or a provision of Donkey Wheel Ltd’s Constitution.

Section 1322 of the Corporations Act (‘the Act’) states:

1322 Irregularities
(4)Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a)an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;
(b)an order directing the rectification of any register kept by ASIC under this Act;
(c)an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a);
(d)an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;

and may make such consequential or ancillary orders as the Court thinks fit.
(5)An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence.
(6)The Court must not make an order under this section unless it is satisfied:
(a)in the case of an order referred to in paragraph (4)(a):
(i)that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii)that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii)that it is just and equitable that the order be made; and

(b)in the case of an order referred to in paragraph (4)(c)—that the person subject to the civil liability concerned acted honestly; and
(c)in every case—that no substantial injustice has been or is likely to be caused to any person.

Section 231 of the Act states:

231 Membership of a company
A person is a member of a company if they:
(a) are a member of the company on its registration; or
(b)agree to become a member of the company after its registration and their name is entered on the register of members; or
(c)become a member of the company under section 167 (membership arising from conversion of a company from one limited by guarantee to one limited by shares).

The Constitution
Governing provisions

Clause 9 of the constitution is in the following terms:

Membership
(a) The members are:
(1)the persons consenting to be the initial members set out below; and
(2)any other persons the directors admit to membership in accordance with this Constitution.

(b)Every applicant for membership of the company (except the initial members) must be proposed by another member. The application for membership must be:
(1)made in writing and signed by the applicant and his or her proposer; and
(2)in the form prescribed by the directors.

(c)At the next meeting of the directors after receipt of an application for membership, the directors must consider the application and decide whether to admit or reject the admission of the applicant. The directors need not give any reason for rejecting an application.

Clause 10 deals with when membership ceases. The criteria for cessation includes when a person dies:

A person immediately ceases to be a member if the person:
(a) dies;
…

The provisions with respect to general meetings are found at clause 11. Clause 11.4 provides for the chairperson of directors to be the chairperson presiding at each general meeting. If there is no such chairperson present or willing to act, the members present must elect as chairperson of the meeting:

…
(4) another director is present and willing to act; or
(5)if no other director present at the meeting is willing to act, a member who is present and is willing to act.

Clause 11.6 deals with decisions at general meetings:

…
(b)where the votes on a proposed resolution are equal, the chairperson of the meeting has a casting vote in addition to his or her deliberative vote.

Clause 12.2(e) provides as follows:

When office of director becomes vacant
In addition to the circumstances prescribed by the Act, the office of a director becomes vacant if the director:
…
(e) resigns by written notice to the company; or
…

Clause 12.5 deals with the powers and duties of directors:

the directors are responsible for managing the company’s business and affairs and may exercise to the exclusion of the company in general meeting all the company’s powers which are not required, by the Act, or by this Constitution, to be exercised by the company in general meetings.

Clause 12.12 provides for written resolutions in which case a meeting is taken to have been held:

…
(b) for the purpose of rule 12.12(a):
(i) the meeting is taken as held:
A.if the directors assented to the document on the same day, on the day on which the document was assented to and that the time at which the document was last assented to; or
B.if the directors assented to the document on different days, on the day on which, and at the time at which, the document was last assented to;
…

Background

Formal minutes of Donkey Wheel board meetings were not kept in the traditional way. Instead, minutes were deemed to have been kept by making notations on the applicable agenda. The notated agendas were retained as the minutes of meetings.

Whether Jon Brunner attended the board meeting of Donkey Wheel on 15 July 2010 is disputed, which I will say more about that later. On 14 December 2010, David Piggott, as a director of Donkey Wheel, signed a Form 484 recording that Jon Brunner had resigned as a director as at 30 June 2010. A Form 484 is prescribed for under the Act and provides for changes to company details.

The notes taken at the board meeting of 15 July 2010 include relevantly that:

Jon has asked for leave from the Board from now until February retreat when he will reassess the situation.[1]

[1]CB-127.

The copy directors’ report for the year ended 30 June 2010[2] relevantly set out the names of the directors in office at the time during or since the end of the year. The various board members are listed together with appointments and cessations. The report states that Jon Brunner ceased to be director on 30 June 2010.
[2]CB-123.

There was a directors’ retreat in February 2011. Jon Brunner did not attend.

In 2011, Jon Brunner took up a ‘Hub membership’. That Hub membership entitled him to utilise space at Donkey Wheel House. Mr Brunner said that his family commitments did not allow him to continue as a director at that time and he conducted his business from the Hub at Donkey Wheel House. During 2011, Paul Steele had a number of conversations with Jon Brunner.

The celebrations of 120 years of Donkey Wheel House occurred in mid-2011. Jon Brunner attended that celebration.

Claire Brunner made a will dated 17 September 2013. Clause 9 was in the following terms:

I GIVE my [sic] all of my shares in Donkey Wheel Limited to Jane Tewson of 35 Cressy Street, Malvern.

Despite this clause, it is common ground among the parties that there were no shares in Donkey Wheel Limited. Donkey Wheel Limited was a company limited by guarantee. It was further common ground that I should construe the words of the will: ‘I GIVE my [sic] all of my shares …’ as if it were a reference to giving membership.

By an email transmission dated 11 November 2014, Jon Brunner’s solicitor at the time wrote to Michael Witt, director of Donkey Wheel. Michael Witt also acted in relation to Brunner’s family matters. That transmission referred to various Brunner family matters, but not Donkey Wheel.[3] Michael Witt was a solicitor who had acted in relation to Jon Brunner’s estate and other financial affairs for a number of years. Michael Witt was also a director of the family trust or trusts which distributed income to various Brunner family members, including Jon Brunner. I have taken it that correspondence up to September 2015 was addressed to Michael Witt in his capacity as solicitor for Jon Brunner’s estate or as a director of a family trust rather than directed to him in his capacity as a director of Donkey Wheel.
[3]CB-408.

On 22 December 2014, Claire Brunner made a codicil to her will. That codicil relevantly set out:

2.I make the following bequest in addition to those already contained in my Will:
(a)to my friend JANE TEWSON the sum of $100,000 in recognition of her having agreed to become a shareholder of Donkey Wheel Limited;

(b) …

On 17 April 2015, there was an email exchange between Jane Tewson and Colin Duthie. Colin Duthie relevantly set out:

I spoke with Claire again yesterday, and think we should meet to talk further about your contribution to [Donkey Wheel]. When we met with Michael recently, I outlined three of the ways in which you could contribute; as director, as committee member or more informally as a friend of [Donkey Wheel]. Claire is enthusiastic about having you take up an official director role, which I support. In this ‘renewal’ phase, your close links with the Brunner family alongside what you bring professionally, will add significantly to our Board.
…
Claire mentioned the possibility of having you in the mix for a short period (say 12 months), after which we could take stock again in light of Claire’s health. …

Jane Tewson replied:

…
In principle yes, I am interested to ‘be Claire’ while she is unable to be so … that said I only want to if I feel I can contribute and my skills appropriate …[4]

[4]CB-213.

By email transmission dated 23 June 2015, the solicitor for Jon Brunner wrote to Michael Witt.[5] That letter relevantly set out matters in relation to the family dispute and not matters in relation to Donkey Wheel.
[5]CB-96.

Claire Brunner died on 9 August 2015. Probate of her Will and codicil was granted on 18 November 2015.

By further email transmission dated 27 August 2015, the solicitor for Jon Brunner wrote to Michael Witt. Again, that transmission did not deal with any matters relating to Donkey Wheel.

On 14 September 2015, the solicitor for Jon Brunner sent an email to Michael Witt. The transmission dealt with Brunner matters but also included:

The other matter which ought to be attended to without delay, and which ought to be uncontroversial, is Donkey Wheel. Jon had thought that he remained a director (albeit that he was not attending board meetings) but I see from a search that he is not. Could you please make arrangements for his reappoint to the Board and also provide me (on Jon’s behalf) with all necessary Board papers in order that he can get up to speed.[6] [sic]
[emphasis added]

[6]CB-412.

Jane Tewson filled out an application for membership of Donkey Wheel which is dated 21 September 2015.[7]
[7]CB-121.

By email transmission dated 21 September 2015, Colin Duthie circularised board members of Donkey Wheel. The subject matter was: ‘Admission of Jane Tewson to membership of Donkey Wheel Ltd’. That transmission relevantly set out:

Following advice from Lewis Holdway Lawyers in respect of admitting Jane Tewson to membership of Donkey Wheel Ltd, this email contains four (4) resolutions that I put to you for your approval.
1.The Board prescribes the following form for the purposes of cl 9(b)(2) of the Company Constitution:
(i)[Name] of [Address] request admission to membership of Donkey Wheel Ltd (‘the Company’).
I agree to be bound by the Company Constitution.

I agree to contribute an amount of not more than $100 to the property of the Company if it is wound up while I am a member, or within one year of ceasing to be a member, for
…

2.The Board resolves to accept the application for membership by Jane Tewson. In doing so, it notes that:
·Under the Constitution it is given discretion as to the form in which an application may be made.
·It is exercising its discretion to give effect to what it believes is the intention of Ms Brunner to propose Ms Tewson as a member.
·Ms Brunner was a member at the time that she proposed Ms Tewson.

3.The Board resolves to admit Jane Tewson to membership and directs the Secretary to register Jane Tewson as a member on the Membership Register, with effect from 22 September 2015.
4.That the Secretary enter Jane Tewson’s name in the Register of Members.
…[8]

[8]CB-106.

Responses from the various members of the Donkey Wheel Board were received on 22 September 2015, and 28 September 2015. There was unanimous acceptance of the resolutions.

The minutes of the Board Meeting of Donkey Wheel of 28 October 2015 included the following matter:

3.3 Review other decisions

There was a discussion around Jane’s admission as a Member. Jane is happy to be a member at this time, but would like to pass on any decision to become a director until a later date.[9] Transmissions passed between Michael Witt and Jon Brunner’s solicitor on 18 December 2015. In the main, transmissions dealt with Brunner family issues rather than Donkey Wheel. The Donkey Wheel issues related to receipting a grab bag of Donkey Wheel documents including the constitution as ‘Jon is keen to become actively involved with the family charities’.
[9]CB-387.

By email transmission on 22 December 2015 from Jon Brunner’s solicitor to Michael Witt, it was relevantly set out:

…
Also, as you know, Jon maintains that he never resigned from the Donkey Wheel Board, although the ASIC records show his [sic] as ceasing his directorship on 30 June 2010. Could you please let me have a copy of his resignation and the relevant board minutes so that I can at least put that issue to rest.[10]

[10]CB-237.

By email transmission dated 4 January 2016 from Jon Brunner’s solicitor to Colin Duthie and Michael Witt, it was relevantly set out:

…
Critically, I have still not been provided with the Deed establishing the Donkey Wheel Fund, and further it remains a serious concern for Jon that he finds himself excluded from the Donkey Wheel Ltd Board, and that his persistent request for a copy of any document purporting to be a resignation and for any relevant Board Minutes in relation to any resignation, seems to be continually stonewalled.
Having now read the Constitution you have provided, it seems apparent that by virtue of the operation of clause 10(a) and (c) in relation to both Claire and Nic, Jon is the sole member of Donkey Wheel Ltd. I would be grateful if you would let me have your confirmation that this is also the Board’s understanding of the position, and, if it is not the Board’s understanding, please let me know what the Board’s understanding is.
Under the circumstances, Jon has decided that a general meeting with GM needs to be held to consider all Board positions and to that end a notice under s 249D of the Corporations Act 2001 (Cth) was served to the company’s registered office this afternoon. A copy is enclosed for your information. Please bring the notice to the attention of the directors as required by sec 203D(3) and invite all directors to state their case (if they wish) as contemplated by sec 203D(4).[11]

[11]CB-239.

The notice, dated 4 January 2016,[12] relevantly set out resolutions to be put at the general meeting as follows:
[12]CB-240.

(a)That pursuant to paragraph 12.1(c)(1) of the Constitution of the Company the minimum number of directors be reduced from three to two.

(b) That [Jon Brunner] be appointed as the director of the Company.
(c)That [Jon Brunner’s solicitor] be appointed as director of the Company.

(d) That [Michael Witt] be removed as a director of the Company.
(e) That David Piggott be removed as a director of the Company.
(f)That Elizabeth Saphyra Jennings be removed as a director of the Company.
(g)That Colin Craig Duthie be removed as a director of the Company.
(h)That [Michael Witt] be removed as the Secretary of the Company, and
(i)That [the solicitor for Jon Brunner] be appointed as the Secretary of the Company.
(j)Any further resolutions which may be appropriate and of which due notice is given.

The following resolutions were not carried. With respect to each resolution, each of the proxies voted against the resolution. They are as follows:

1.1That pursuant to paragraph 12.1(c)(1) of the Constitution of the Company the minimum number of directors be reduced from three to two.
1.2That [Jon Brunner] be appointed as a director of the company.
1.5That David Piggott be removed as a director of the company.
1.6That Elizabeth Saphyra Jennings be removed as a director of the company1.7 That Colin Craig Duthie be removed as a director of the company.

In January 2016, the solicitor for Jon Brunner prepared a draft originating process to ‘have a register kept by the company corrected, an application to invalidate a purported issue of a share’.[13] A draft affidavit in support of that contemplated proceeding was prepared for Jon Brunner.
[13]CB-242.

After setting out a general background in the draft affidavit which included relationship between his parents and siblings not being harmonious, it was set out:

I say that the notice (referring to the form 484 Notice setting out the resignation as at 30 June 2010) is false and that I have never resigned my directorship.[14]

[14]CB-250.

By email transmission dated 12 January 2016[15] to Michael Witt, the solicitor for Jon Brunner relevantly set out:

The recent Donkey Wheel disclosures and developments are, from Jon’s perspective, the final straw in a long series of matters which make your ongoing involvement in Brunner family affairs unacceptable from his perspective, and in any event inappropriate.
Accordingly, I seek on Jon’s behalf the following –
(a)       …
(b)       your resignation from the positions you hold at Donkey Wheel Ltd.
(c)       …

[15]CB-100.

Later that same transmission set out:

Your ongoing failure to provide any information concerning Donkey Wheel or to take any action to reinstate Jon’s board position when requested. You have verbally confirmed a number of times that he had ‘resigned’ but have never, despite request, provided a copy of any resignation, nor any board minute concerning any purported resignation. Further, you have complained to me about statements attributed to Jon concerning Donkey Wheel House. Now we have a farcical situation where the Donkey Wheel Board seeking independent legal advice with a view to avoiding any obligation to disclose information to its sole member!
[emphasis added]

It must be noted that the transmission was of three pages and, apart from the matters to which I have referred, the substance of the transmission was to deal with the ongoing family dispute.

By email transmission dated 14 January 2016, the plaintiff’s solicitors wrote to Jon Brunner’s solicitor. That transmission relevantly set out:

…
We understand you are concerned that Jane Tewson was admitted as a member by the Board following receipt of your client’s requisition for a general meeting.
We advise that this is not the case. We are instructed that Ms Tewson became a member of the Company on 22 September 2015, several months before the receipt of your client’s requisition for a meeting.
The catalyst for Ms Tewson’s admission at this time was the receipt of the Board of confirmation of the written directions from Ms Brunner regarding Ms Tewson’s membership.
As Board meetings are confidential, we are not in a position to provide them to you at this time. However, we note that the admission of Ms Tewson was the express wish of Ms Claire Brunner, and that in admitting Ms Tewson, the Board was giving effect to the wishes of Ms Brunner, according to her written directions.[16]

[16]CB-432.

With respect to the resolution specifically, that transmission set out:

We are instructed that your client has not been attending board meetings, or otherwise participating as a member of the board since mid-2010, a period of more than five years.
We are instructed that there is no record of the board resolution granting your client a leave of absence. The records indicate that at a board meeting on 15 July 2010, the Board considered a request from your client for a leave of absence until the February 2011 retreat, but that the board’s decision in response to that request was to ask your client to confirm his status.
One of the directors recalls that following your client’s request for a leave of absence, Claire Brunner and Nic Brunner undertook to have a conversation with your client regarding his intentions. The details of that conversation are unknown to our client, but we are instructed your client was removed from the ASIC register as a result of the instructions provided by Claire and Nic following that conversation, and a contemporaneous handwritten note indicates there was a resignation.
…
In any event, the 2011 February retreat minutes do not support the contention that your client requested and was granted a leave of absence. Your client is recorded in the minutes of the Annual General Meeting (11 February 2011) as an apology, with ‘Claire Brunner authorised to act as proxy’ for Jon Brunner in his capacity a member. By contrast, your client is not recorded in the minutes of the board retreat on 11-12 February at all – whether present or as an apology.
…
Finally, we note that Latchford Premier Cinema Ltd v Ennion [1931] 2 Ch 409 is an authority in support of the proposition that an oral resignation can be valid, even where the Constitution requires resignation in writing.

By email transmission dated 15 January 2016 from Jon Brunner’s solicitors to the plaintiff’s solicitors, that transmission relevantly set out:

…
Mrs Tewson is a long-time friend of Mr Brunners and he has no wish to cause her any embarrassment. He is perfectly willing to admit her to a membership on a proper basis if she wishes to have a role with Donkey Wheel going forward. Her role has already been the subject of discussions between Jasmine Brunner, Michael O’Meara, Mrs Tewson and Mr Brunner.
…

I note that Jon Brunner’s position seems to be about form rather than substance. That email transmission went on to deal with joining the issue as to whether Jon Brunner had resigned and disputing the substance or effect of Latchford Premier Cinema. The transmission then relevantly set out:

The simple facts are that Mr Brunner did not wish to attend board meetings with his siblings, but always intended to, and did, remain a director. If you wish to be critical of his performance as a director, and cite non-attendance at board meetings as evidence in support of that, then that would be logical, albeit purposeless. How is a request for leave of absence able to be construed as anything other than a clear expression of a desire to remain a director whilst being formally excused from attendance at meetings?

That email transmission was responded to by the plaintiff’s solicitors on 10 February 2016. That transmission set out that the basis for the proposal was contained in Ms Claire Brunner’s Will. Authority was set out in support of contention that a substance over form approach ought to be adopted. The transmission was of 12 pages and comprehensibly addressed all the issues raised by Jon Brunner’s solicitors. It concluded as follows:

11.1The current Board is comprised of directors of high calibre, who have demonstrated genuine commitment to the achievement of Donkey Wheel’s charitable purposes and who have acted in the best interests of Donkey Wheel.
11.2Your client’s threats to embroil Donkey Wheel in litigation over the admission of Ms Tewson, when your client has already acknowledged her suitability for membership, is cause for concern among the directors that your client is not simply acting in Donkey Wheel’s best interests and this raises doubts in their minds about the suitability of your client to act as a director of Donkey Wheel.
11.3These concerns are reinforced by your client’s assertions regarding his status as a director. Your client has not fulfilled any of the responsibilities of a director for several years, including exercised due care and diligence, and to maintain that he continues to be a director shows a lack of appreciation of those duties and responsibilities.
11.4You have indicated to us that there was a high level of animosity between your client and his late sister, Ms Brunner, and that this explains your client’s unwillingness to participate as a director. We are not in a position to be able to comment on whatever the relationship may have been between your client and Ms Brunner, but even if your explanation were accepted, the duties imposed upon a person that acts as a director of a company must take precedence over personal feelings. Your client has failed to show an appreciation for those duties.
11.5We consider it in the interests of all parties that the dispute over the composition of the membership and directorship of Donkey Wheel is resolved without incurring the substantial costs (of time and money) that would result if this matter were referred to Court for resolution. …

By email transmission dated 29 February 2016, Jon Brunner’s solicitor, Bruce McNabb, wrote to the plaintiff’s solicitors. That transmission concluded:

I repeat that Jon Brunner does not wish to remove any particular director from office. He would appreciate transparency and cooperation in his efforts to advance the interests of Donkey Wheel.

A general meeting of Donkey Wheel was held on 29 March 2016 (‘the 2016 meeting’) pursuant to the requisition by Jon Brunner dated 4 January 2016. That meeting had been adjourned previously by mutual consent. The minutes record as present:

Bruce McNabb (Jon Brunner’s solicitor) as proxy for Jon Brunner.
Alex King as proxy for Jane Tewson.
In attendance:
Col[in] Duthie as Donkey Wheel Chairperson
Elizabeth Saunders of Lewis Holdway as the legal representation for Donkey Wheel
The minute taker.

A resolution that Jon Brunner be appointed a director was unanimously rejected. Even Bruce McNabb voted against that resolution.

A resolution that Bruce McNabb be appointed as a director of the company was not carried. Bruce McNabb voted in favour and Alex King voted against. Given a tied vote, the Donkey Wheel constitution stated that the chairperson is able to cast the deciding vote. Colin Duthie as chairperson exercised that right and voted against the same.

The same result occurred with respect to resolution 1.9 which was to appoint [Jon Brunner’s solicitor] as secretary of the company.

The same result occurred in relation to resolution 1.10 that:

(a) Serge Gerard Thomann be appointed as a director of the company;

(b) Charles Edward Brent be appointed as a director of the company;

(c) the directors be authorised and directed to obtain the opinion of senior counsel appointed by the Chairman of the Bar Council for that purpose as to the validity of the admission of Jane Tewson as a member of the company by the board on or about 21 September 2016;

(d) in the event that opinion obtained under resolution (c) is that the Jane Tewson membership is invalid, then the directors are directed to revoke Jane Tewson’s membership.

Resolutions seeking Michael Witt to be removed as a director and as a secretary of the company were carried on the basis that that was consistent with the action already taken by Michael Witt himself.

The evidence relied upon by the plaintiff

The plaintiff relied upon affidavits of Colin Duthie, Elizabeth Jennings, Paul Steele, David Piggott, Jane Tewson and affidavits in reply by Colin Duthie and Paul Steele.

The defendant relied upon an affidavit sworn by himself.

Paul Steele and David Piggott were cross-examined. Jon Brunner was cross‑examined.

Affidavit of Elizabeth Anne Shalder sworn on 11 May 2016

I will not refer to the affidavit of Elizabeth Anne Shalders sworn 11 May 2016. In effect it produces the documents which have been referred to in the background.

Affidavits of Colin Duthie sworn on 24 June 2016 and 5 August 2016

Colin Duthie was the chairman of Donkey Wheel between November 2008 and July 2010. He then returned as a consultant from February 2014 and as a director and the non-executive chairman of Donkey Wheel from January 2015.

In or around mid-2014, Claire Brunner moved to Brunswick Heads in New South Wales. Prior to Claire moving to New South Wales she had said to the Board in Colin Duthie’s presence, although he could not recall precisely when, that she wanted Jane [Tewson] to succeed her at Donkey Wheel. The minutes of the Board for 22 January 2015 provided:

Dave [Piggott] noted that Claire Brunner has requested that Jane Tewson be appointed to the Board … Michael [Witt] noted that Claire was firm in her intentions for Jane to be a director and on the Board.

Colin Duthie transmitted the resolutions for the admission of Jane Tewson as a member of Donkey Wheel on 21 September 2015.

On 27 May 2015, Colin Duthie was copied to an email from Michael Witt addressed to various members of the Brunner family including Jon Brunner. The purpose of the email transmission was to give notice of the Donkey Wheel Annual General Meeting scheduled to take place on 17 June 2015. The email included an invitation to attend in person or by proxy. Colin Duthie attended. Jon Brunner did not.

Colin Duthie had prepared the blank membership form on 10 September 2015. That was at least four days prior to Jon Brunner’s solicitor emailing Michael Witt about the issues dealing with Donkey Wheel. Colin Duthie said that the catalyst for preparing the documentation was Claire’s death rather than anything else.

The first time that Colin Duthie became aware that Jon considered himself a director of Donkey Wheel was in December 2015 when he was copied in on correspondence from his solicitor, Bruce McNab.

Affidavit of Elizabeth Saphyra Jennings sworn 24 June 2016

Elizabeth Jennings was appointed to the Board on 6 August 2011. Elizabeth Jennings met Jon Brunner on 23 February 2016 at a meeting. She did not recall having met him before that date. Since August 2011, apart from attending Board meetings, she also attended Donkey Wheel related events, such as the annual Christmas party or events hosted by tenants of Donkey Wheel House. She did not recall meeting Jon Brunner at any of those occasions.

In 2014, Claire Brunner mentioned to the Board of Donkey Wheel that she wanted her friend, Jane Tewson, to join Donkey Wheel. During the second half of 2014 and in 2015 other Board members had discussions with Jane about her potential involvement in Donkey Wheel, with Elizabeth Jennings receiving updates of those discussions. Jane Tewson’s potential involvement was noted in minutes of Board meetings held on 22 January 2015, 4 March 2015, 27 May 2015 and 24 June 2015.

On receipt of the email transmission of 21 September 2015 with the circular resolutions for the admission of Jane Tewson as a member of Donkey Wheel, Elizabeth Jennings responded in favour of the resolutions.

Affidavit of Paul Steele sworn on 24 June 2016 and 5 August 2016

Paul Steele took up the position of CEO of Donkey Wheel in 2010. He commenced in that capacity on 12 July 2010 even though he had not signed his contract by that date. He attended part of the board meeting on 15 July 2010. Thereafter he attended board meetings from August 2010.

In December 2010 he instructed his executive assistant to lodge the Form 484 under the direction of the then Chairman, David Piggott, notifying ASIC that Jon Brunner ceased to be a director of Donkey Wheel with effect from 30 June 2010. During the second half of 2010 one of Paul Steele’s priorities was to ensure that Donkey Wheel’s compliance issues were updated. By that time he had understood from discussions with Claire and Nic Brunner that Jon Brunner was no longer involved in Donkey Wheel.

During the course of 2011 he had a number of conversations with Jon Brunner. In early 2011 he spoke with Jon Brunner who said to him that although he was disappointed he was no longer a director, it was the right thing for now. In or around July 2011, Paul Steele had another conversation with Jon Brunner shortly after the Donkey Wheel House drinks function to mark the 120^th birthday of the Donkey Wheel House building, in which he acknowledged that he was not a director of Donkey Wheel. Jon Brunner had called to say that he was disappointed that there was not more recognition of the Brunner family in the Chairman’s speech on that night.

Paul Steele also had a number of other conversations in 2011 with Jon Brunner, one of which was to remind him that he was not able to approach third parties and deal with them on behalf of Donkey Wheel.

It was put to Paul Steele that Jon Brunner’s sworn evidence was that he maintained to Paul Steele that he was a director who had taken leave of absence. Paul Steele refuted that proposition.[17]
[17]T100.

On 17 September 2013, following a Donkey Wheel Board Meeting, Paul Steele witnessed Claire Brunner sign her Will. When witnessing Claire sign her Will, Claire said to Paul Steele that she was making sure Donkey Wheel was taken care of and referred him to clause 9.[18]
[18]See T82-83.

On 23 July 2014, Paul Steele met with Claire Brunner at her home. At that time Claire Brunner was very ill. At that meeting Claire Brunner said that Jane would be taking on her shareholding in Donkey Wheel and that, in addition, she wanted Jane to become a director.

From a discussion with Michael Witt, the then solicitor for Donkey Wheel, and also one of its directors, Paul Steele understood that the terms ‘shareholding’ and ‘membership’ referred to the same thing.

Paul Steele had conversations with Donkey Wheel Board members about Jane Tewson’s membership in August 2015, following the passing of Claire Brunner. On 26 August 2015 he met with Jane Tewson to discuss her membership of Donkey Wheel.

Jane Tewson had attended a number of board meetings. However, she had not committed to becoming a board director.[19]
[19]T102.

It was put to Paul Steele that he was concerned about if Jon Brunner became the only member of Donkey Wheel. It was put to him that his position as CEO might be terminated. Paul Steele acknowledged that that might happen.[20]
[20]T106.

It was put to Paul Steele that the motivation for the admission of Jane Tewson as a member of Donkey Wheel was to avoid Jon Brunner being the sole member. Paul Steele said that there had been no discussion about Jon Brunner being the sole member of Donkey Wheel[21] and that he was not aware that Jon Brunner’s solicitor had contacted Michael Witt in the middle of September 2015. He did not know about that until December 2015.[22]
[21]T103.
[22]T105.

Prior to Claire’s death, if there had been a deadlock between Claire and Jon the casting vote was exercised by the chairperson. It was put to him that if Jon Brunner was the sole member then there would be no authority reposed in the chairperson at any meeting of members.[23] However, Paul Steele has never been a director of Donkey Wheel and did not and was not entitled to vote on the admission of Jane Tewson to membership.
[23]T107.

Affidavit of David Piggott sworn on 27 June 2016

David Piggott has been a director of Donkey Wheel since November 2009. He was the Chairman of the Donkey Wheel Board between July 2010 and December 2014.

At the Board Meeting in July 2010, the Board was informed that Jon Brunner wanted to take a leave of absence and that he would reassess his position before the February 2011 Board Retreat.

Following the July 2010 Board Meeting, David Piggott had a discussion with Claire Brunner and Nic Brunner about Jon’s status as a director. In that conversation David Piggott was told that Jon had decided to resign as a director. Further, Claire Brunner had also said to him that ‘The defendant had said that he would like the opportunity to join Donkey Wheel again when things had settled down with his family’. That resignation was confirmed in Donkey Wheel’s directors’ report for 2009/2010. On 14 December 2010 under David Piggott’s direction, the executive assistant to the CEO lodged a Form 484 notifying the cessation of Jon Brunner as a director with effect from 30 June 2010.

It was put to him that Jon Brunner attended the Board Meeting on 15 July 2010. Mr Piggott maintained that Jon Brunner did not attend. The agenda for that board meeting which became the minutes after the notation were added records Jon Brunner ‘has asked’ for leave of absence. I note that the agenda item for that meeting was ‘Chair and board membership’ and the reference to the leave appears to be an insertion constituting the minutes maintained that day. I further note that the minutes do not record who attended the meeting. The reference to the leave of absence might have recorded what had previously had been requested or might have been recording what occurred on that day. Further, I cannot distil anything from the language used whether a necessary inference was that Jon Brunner attended or that he had made the request previously and that request was put to the board on that day. In any event, nothing turns on whether or not Jon Brunner was present at that meeting in relation to whether he had or had not resigned.

In 2014, David Piggott had a discussion with Claire Brunner during which Claire Brunner said to him that she wanted Jane Tewson to become involved in Donkey Wheel and to take over her membership.

In 2015, there were board discussions about Jane’s involvement in Donkey Wheel. That was recorded in the board minutes dated 22 January 2015, 4 March 2015, 27 May 2015 and 24 June 2015.

In September 2015, David Piggott voted in favour of the resolution to admit Jane Tewson to membership.

It was put to David Piggott that in voting in favour of the resolution he did not have regard to Jon Brunner’s interests. David Piggott questioned whether Jon Brunner’s interests were the same or the equivalent of the company’s interest. David Piggott also confirmed that he knew that at the time the resolution was proposed, Claire Brunner was dead, had not signed the application form and as such there was not a current member who had signed the application form.[24]
[24]T82-83.

However, prior to the resolution being circulated to the directors of Donkey Wheel, the board had sought and obtained advice with respect to the resolution to admit Jane Tewson as a member. The advice had been sought as the board assumed that the membership would automatically move from Claire to Jane as part of the will. The board had assumed that when Claire passed, that the membership would automatically go to Jane and that the board did not need to get involved.[25]
[25]T82, 83 & 88.

David Piggott conceded that he did have concerns about Jon Brunner being the sole member of the company as he was concerned that Donkey Wheel’s vision would be lost. Although David Piggott was aware that Jon Brunner’s solicitor had already made contact with the board prior to voting upon the resolution, he did not agree that that gave rise to any urgency. The motivation for the resolution was Claire’s death.[26]
[26]T93.

Affidavit of Jane Tewson sworn on 26 July 2016

Jane Tewson has had extensive experience in the Not for Profit sector in both the UK and Australia. For example, she founded Comic Relief (also known as Red Nose Day) which has raised its billionth pound in England in 2015. In 1999, Jane Tewson was awarded a CBE for services to innovation in charity. In 2001, Jane Tewson was named as one of the top ten innovators in the UK by the Times newspaper. In 2007, Jane Tewson was named the Ernst & Young Australian Social Entrepreneur of the Year.

Jane Tewson and Claire Brunner had been close friends for a number of years. In or around 2010, Claire Brunner was diagnosed with cancer. During 2012 Claire Brunner asked Jane Tewson if she would be prepared to take over her interest (which she referred to as a ‘share’) in Donkey Wheel after her death. Jane Tewson agreed but given her existing responsibilities and commitments she doubted that she was in a position to commit to a role on the Donkey Wheel Board.

Jane Tewson was happy to become a member of Donkey Wheel but has reserved her position in relation to becoming a director. She was not cross-examined on her affidavit.

The evidence relied upon by the Defendant
Affidavits of Jon Brunner affirmed on 21 July 2016 and 4 September 2016

Jon Brunner denied that he ever told Nic Brunner or Claire Brunner that he was resigning from Donkey Wheel. He said ‘at the time I wished to be excused from attending Board meetings with my siblings because of tension between us, and also my time constraints as a single father, but always intended to remain a director of our family charity.’[27] That observation is, in any event, corroborative of the conversation requiring him to desist from representing Donkey Wheel.
[27]CB-402.

Jon Brunner denied speaking to Paul Steele about not being a director. He said ‘I have always maintained that I was a director even though I had taken leave from attending Board Meetings. His recollection of discussions with Paul Steele about representing Donkey Wheel were to the effect that the proper process needed to be followed and that Board approval for matters was required.’[28]
[28]CB-403.

He maintained he was familiar with processes. ‘I am a director of a number of other companies and know that a written consent to be appointed as a director of a company is required and that a written resignation is also required in order to cease to be a director unless a director is removed by company’s members.’

Jon Brunner conceded that he had ‘numerous conversations’ with Claire Brunner and Nic Brunner during the period of July 2010 to February 2011. However, he did not provide to the Court the substance of those conversations.[29]
[29]T148.

Jon Brunner still received Board papers for the next six or seven months after he took leave.[30]
[30]T152.

Although Jon Brunner agreed that he received Board papers for about six or seven months after the July 2010 meeting, he does not concede receiving the 2009-2010 Directors’ Report which was provided by email to relevant persons and parties on or around 1 December 2010. That Report sets out that Jon Brunner ceased to be a director as at 30 June 2010.

After February 2011 he did not make any enquiry with the Board about what was happening in relation to his membership or anything to do with the company.

Jon Brunner sought to justify not acting as a director during the period of February 2011 onwards as he had taken leave so he did not think he had to.[31]
[31]T154.

Jon Brunner denied that he had renewed interest in becoming a director of Donkey Wheel only after Claire’s death as he would be in sole control. He did concede that ‘I’ve come to know that since but at the time it wasn’t really in my mind.’[32]
[32]T156.

Jon Brunner concedes that he had conversations with Mr Steele but contends that Steele misunderstood what was said. His version was: At that stage I said I had taken leave of the Board.[33]
[33]T158.

Jon Brunner maintained a Hub membership for approximately a year where he used the Donkey Wheel House premises to carry on his own business. That commenced in about late 2010. As he was at Donkey Wheel House he spoke to Mr Steele from time to time.[34]
[34]T162.

It was put to Jon Brunner that he had a telephone discussion with Mr Steele after the 120^th birthday celebrations. Jon Brunner agreed with the majority of the substance of that conversation in relation to the non-recognition or under-recognition of his family, however, disagreed with the use of the words ‘no longer a director’. However, he sought to justify that on the basis that he was still a director.

Jon Brunner also conceded that there was at least one telephone conversation with Steele in 2011 about the continued approach to third parties. If that conversation did not take place on the basis that Jon Brunner was no longer a director I cannot comprehend why the warning would have been given, or the conversation needing to have taken place at all.

Jon Brunner attended a meeting on 21 December 2015 with Colin Duthie and Paul Steele. He was provided with a copy of the Donkey Wheel Special Report.[35] The report included a five year summary. Directors other than Jon Brunner were identified in the report. Jon Brunner did not take that up with ASIC.
[35]CB-142.

Jon Brunner accused Michael Witt of fabricating documents with respect to resignation notwithstanding that Mr Piggott gave evidence that he had instructed his executive assistant to prepare the documentation. Jon Brunner sought to advance that that was on Michael Witt’s advice. There seems to be no basis to direct allegations against Michael Witt other than the longstanding animosity between Michael Witt and Jon Brunner arising from the family dispute. In 2016, Jon Brunner’s only source of income was distributions from the Family Trust. It seems that the allegations against Michael Witt were really directed at him in his capacity as a director of the trustee controlling distributions rather than matters pertaining to Donkey Wheel.

As to the appointment of Jane Tewson, Jon Brunner maintained that he met Jane Tewson in December 2015 to discuss a possible role for her with the Company. ‘At that meeting, Jane Tewson indicated that she did not really have time for a significant role with the Company. She did not mention anything in the meeting about her purported membership of the Company.’

Jon Brunner set out in his affidavit that he was not aware that Jane Tewson had been admitted to membership until late on 12 January 2016. On 15 January 2016, Jon Brunner sent an email to Jane Tewson. That email relevantly set out:

There has been a very clear agenda over the last five years to keep me out of Donkey Wheel, primarily I believe by Michael Witt (no doubt on Claire’s instruction). Bruce [Jon Brunner’s solicitor) has been asking repeatedly for at least 18 months for information, and his ongoing requests have been stonewalled.
I seek your support in removing the present board and replacing them initially with Bruce and myself. We both want to have others join later when appropriate. I know that Mo thinks that this is a bit aggressive, but what the board has done is frankly appalling – effectively fraud – and although they really ought to be reported to ASIC, I just want them out of the way, and in particular Michael Witt. There can be no doubt that their actions were deliberately aimed at me, although I do not know if all of the directors were really aware of what they were doing.
What Bruce has suggested, is that after the transition I ought to properly propose you for membership (if you would like it) and that (if you would like it) we offer you a seat on the Board going forward. The present situation cannot be rectified by some sort of ratification. … [36]

[36]CB468.

I note that that transmission hardly reflects the facts. Firstly, Jon Brunner had not been kept out of Donkey Wheel for a period of five years. He had simply not had any involvement in Donkey Wheel, nor did he seek any involvement until after Claire’s death. Further, any contact by his solicitor initially involved matters relating to the family dispute and it was not until the transmission of 14 September 2015 that any issue relating to Donkey Wheel was raised by Jon Brunner’s solicitor. That transmission contained a request for Jon Brunner to be reappointed to the board. Further, I reject the contention that he had sought information about Donkey Wheel over the past 18 months or that he was kept out of Donkey Wheel. That is illustrated by the invitation to him to attend the annual general meeting of Donkey Wheel in June of 2015. Jon Brunner did not attend.[37]
[37]T168.

As to the March 2016 AGM, Jon Brunner sought to justify why Mr McNabb voted against his appointment as director as:

It was obvious they had a problem with me being on the Board, from their actions, so as a compromise, we suggested that we put three other directors on the Board, at least while we worked out what was going on and sorted this matter out.

That proposal was not accepted. I further note it is inconsistent with the transmission to Jane Tewson dated 15 January 2016.

Jon Brunner and his corporate history

Jon Brunner was cross-examined about his compliance history with ASIC, being pursued by the ATO on at least two occasions, and being involved in bankruptcy proceedings. However, the database records are, in the main, all prior to 2010.[38]
[38]T196.

A writ filed in June 2016 by the Deputy Commissioner of Taxation claimed the sum of approximately $125,000. The primary debt was with respect to a superannuation guarantee which dated back to 2003. Jon Brunner claimed not to have seen the writ prior to being handed it in the witness box and explained that he had not been served with the same because his address was 1B Wordsworth Street, rather than 22A Wordsworth Street, in St Kilda.[39] He claimed not to have received any demands with respect to the superannuation guarantee prior to that date.[40]
[39]T197.
[40]T198.

Jon Brunner said he was not aware of ‘strike-off actions in progress’ or deregistration of companies of which he was a director, even in 2016. He kept pointing to the incorrect address recorded with ASIC. He conceded that the failure to be notified was because of his failure to comply with his obligations to provide a correct address.[41]
[41]T204.

Jon Brunner did not ensure the companies of which he was a director filed their annual returns.[42]
[42]T208.

Jon Brunner agreed that he had been derelict in his duty as director of the companies of which he had been a director since 2010 by not filing annual returns.[43] Jon Brunner also agreed that he was a director of 20 companies which had been deregistered in the period July 1999 through to July 2016.[44] Jon Brunner was further taken to a number of companies to which an external controller was appointed, whether it be a receiver and manager or liquidator. However, the three referred to were all placed under external administration prior to July 2010.[45]
[43]T209.
[44]T212.
[45]T214-215.

Jon Brunner had been prosecuted and fined by ASIC on two occasions for failing to provide a report as to the company’s affairs to be submitted to a liquidator.[46] On one of these occasions, specifically the second occasion, he was prosecuted pursuant to s 530A – failing to assist a liquidator.[47]
[46]T210.
[47]T210.

Counsel for the plaintiff identified various prosecutions by ASIC prior to February 2008. At least one of those was a penalty imposed pursuant to s 1314 for continuing offences. Jon Brunner agreed.[48]
[48]T212.

Jon Brunner’s position
Directorship

Jon Brunner’s counsel acknowledged that even if the procedure for retirement as a director was not adhered to, the Court’s discretionary power under s 1322 extended to validation.[49]
[49]T239.

There is no evidence of Jon Brunner having tendered his resignation by written notice to Donkey Wheel as required by r 12.2(e) of Donkey Wheel’s constitution, because he never did so.

Although Jon Brunner acknowledges that Donkey Wheel can dispense with formalities set out in its constitution so as to allow for the resignation of a director orally by agreement, that dispensation must be understood as a reference only to Donkey Wheel by its members dispensing with the requirements.[50] The members did not dispense with any formality.
[50]Cain v Aero Marine Consulting Pty Ltd (2003) 133 FCR 1; Latchford Premier Cinema Ltd v Ennion [1931] 2 Ch 409; Knight v Bulic (1994) 13 ACSR 553.

As a director of a public company, Jon Brunner could not be removed from, or be required to vacate, by other directors.[51] Plainly, the directors of the company had no power to remove one of their number from the board. That could be done only by the company in general meeting.
[51]Section 203E of the Act; Bell v Burton (1993) 12 ACSR 325 at 333 per Tadgell J.

Contrary to hearsay evidence emanating from Claire Brunner and Nick Brunner as to what they thought about Jon Brunner’s status (which should be awarded little or no weight), Jon Brunner’s evidence, tested by cross‑examination, was that he never resigned on a permanent basis. It was always his intention, and he maintained, that he remained a director. The subsequent conduct cannot be relied upon to transform retrospectively what Jon Brunner said or did in 2010.

Jon Brunner’s counsel conceded the Court could look at what may have occurred, for example, six months later, in order to infer from that what in fact did or did not occur in relation to Jon Brunner’s status as at 30 June 2010, but no more.[52]
[52]T231.

Jon Brunner’s counsel relied upon Cain v Aero Marine Consulting Pty Ltd,[53] where Goldberg J referred to Latchford Premier Cinema,[54] where it was said that the:

defendants orally tendered their resignations as directors at the company’s annual general meeting and the meeting accepted their resignations. The court held that the resignations were valid.[55]

[53]Cain v Aero Marine Consulting Pty Ltd (2003) 133 FCR 1 (‘Cain’).

[54][1931] 2 Ch 409.

[55]Cain, 46.

He point made was that only the members could accept the resignation which was found to have occurred by the sole shareholder in Cain.

However, at the time of the acknowledgement of resignation to Claire Brunner and Nick Brunner, the three members of the company were all present. It goes without saying that if I accept the conversation, Jon Brunner as a member obviously accepted his resignation. It is said that Claire and Nick Brunner also accepted the position by communicating the substance of the conversation to the board. The board accepted the resignation by at least, the completion of the Form 484 and not providing material to Jon Brunner after December 2010.

Jon Brunner’s counsel further submitted that I should regard the hearsay evidence as being unreliable as Claire and Nick sued Jon Brunner in 2005. It was submitted that the three were not getting along, being the primary reason as to why I should treat the hearsay evidence with more caution.[56] In essence the credibility of the evidence was challenged due to the relationship between the relevant persons.
[56]T240.

Jon Brunner’s counsel submitted that I ought not find that the (failed) resolution to appoint Jon Brunner at the 2016 meeting is conclusive that Jon Brunner accepted that he was not a director. The resolution must be read in the context of the correspondence passing between the parties. By email transmission of 22 December 2015, written by Jon Brunner’s solicitor, it is clear that Jon Brunner maintained that he had never resigned from the Donkey Wheel board. That position was maintained in the correspondence of 4 January 2016, written also by Jon Brunner’s solicitor. However, I observed during the course of argument that the letter was contrary to the facts almost a construction.[57]
[57]T246.

Jon Brunner’s counsel submitted that the failure to revert to the other board members at or after the retreat in February 2011 merely meant that the leave of absence continued for longer than was originally contemplated.[58]
[58]T248.

Apart from receiving board documents for some months after July 2010, it is generally accepted that he had no contact with directors or members, apart from Claire and Nick Brunner, up until attending the 120^th anniversary of Donkey Wheel House.[59]
[59]T249 and 250.

Each of Mr Steele and Mr Piggot accepted that Jon Brunner never said to each of them that he intended to resign.

Jon Brunner’s counsel challenged Mr Steele’s evidence that Jon Brunner had acknowledged that he was no longer a director to him.[60] Jon Brunner’s counsel asked me to accept that Jon Brunner’s evidence, where he said to Steele that him not acting as a director was ‘the right thing for now’, was what the witness accepted.[61]
[60]T255.
[61]T255.

Jon Brunner’s counsel took me to Knight v Bulic[62] and submitted that there had to be communication of the resignation and acceptance thereof. Further, he submitted that Hayne J did not have regard to the fact that the plaintiff did not thereafter participate as being significant. However, Hayne J found in any event that there was no evidence sufficient to conclude that the company accepted such offer of resignation. I observe that is not the case here.
[62](1994) 13 ACSR 553.

Plaintiff’s counsel referred to the decision of Goldberg J, referring to Bennett J in Latchford Premier, and highlighted that the ratio was acceptance of resignation ‘by agreement’ and it did not dictate that the acceptance be permissible by resolution of the members.[63]
[63]T337.

The three members of the company, in July 2010, when the defendant resigned, were Claire Brunner, Nick Brunner and Jon Brunner. Both Claire and Nick Brunner were aware of and accepted Jon Brunner’s resignation by their conduct–Claire informed the chairman, David Piggott, of Jon Brunner’s resignation in the presence of Nick. Mr Piggott’s affidavit at paragraph 15 provides similar evidence.[64]
[64]T338.

Plaintiff’s counsel relied upon the Form 484 itself and contended that it was prima facie evidence of the resignation. Whilst that might be correct when viewed by a third party, the form does not of itself effect the resignation.

Section 1274B gives evidentiary status to information extracted by the data processor from the national data base. Relevantly, s 1274B(2) provides:

In a proceeding in court, a writing that purports to have been prepared by ASIC is admissible as prima facie evidence as to the matters stated, in so much as the writing has set out what purports to be the information obtained by ASIC by using the data process from the national data base.

In other words, the writing is proof of such a matter in the absence of evidence to the contrary.

If Form 484 is invalid for any reason, it would be just and equitable under s 1322 to make an order due to the period of delay by Mr Brunner. Plaintiff’s counsel submitted that the motivation of Jon Brunner to be a director was to exert control, it was not bona fide and that is demonstrated by the fact that he sought the removal of all the other directors.[65]
[65]T344.

Resignation of directorship

Consequently, I determine that Jon Brunner resigned as a director of Donkey Wheel at some time during the course of the second half of 2010. The preponderance of the evidence considered above is all consistent with resignation.[66]
[66]T339.

I arrive at that determination based upon the following findings:

(a) I do not need to determine if Jon Brunner attended the board meeting of 15 July 2010. Whether the request that was recorded in the minutes for that board meeting occurred prior to the meeting or during the meeting is of no consequence. That is because it was a request for leave from the board until the February retreat held in 2011 when the situation would be reassessed. It of itself, was not a resignation;

(b) At some time after the July 2010 board meeting prior to the end of 2010, Jon Brunner had a conversation or conversations with both Claire Brunner and Nick Brunner. At the time of that conversation or those conversations, each of Jon Brunner, Claire Brunner and Nick Brunner were the only members of Donkey Wheel. During that or those conversations, Jon Brunner said to the other members of Donkey Wheel that he resigned his directorship. The members accepted the resignation and acted upon the same by communicating the resignation to the board and to Paul Steele. The Form 484 was completed;

(i) Jon Brunner’s counsel objected to the admission of that representation on the basis that it was hearsay. I permitted the representation to be made as a hearsay notice under s 63(2)(a) of the Evidence Act had been provided and Mr Piggott was available for cross‑examination.[67]
[67]T66.

(ii) Counsel for Jon Brunner also submitted that I ought not to give it any weight in any event or exclude it as being prejudicial. For the reasons set out hereafter, I am entitled to give the representation full weight.

(c) I accept that Mr Steele during the second half of 2010 had a number of discussions with Claire and Nick Brunner and understood from those discussions that Jon Brunner was ‘no longer involved in Donkey Wheel’. That is, that Jon Brunner had, in effect, said to the Donkey Wheel CEO that he had resigned;

(d) The same objection to this evidence was made by Jon Brunner’s counsel. I ruled that the evidence was admissible on the same basis as referred to in (b)(i) & (ii).

Evidence consistent with or corroborative of Jon Brunner orally resigning in 2010

(a) I accept that in early 2011 Jon Brunner spoke with Paul Steele, and Jon Brunner said to Paul Steele that although he was ‘disappointed that he was no longer a director, it was the right thing for now’.

(b) I accept that in or around July 2011, shortly after a drinks function hosted at Donkey Wheel House to mark the 120th birthday of the Donkey Wheel House building, Jon Brunner telephoned Paul Steele to express disappointment that there was not more recognition of the Brunner family in the chairman’s speech on the celebration night and that during the course of that conversation, Jon Brunner acknowledged that he was not a director of Donkey Wheel.

Was Jon Brunner’s conduct confirmatory of his oral resignation?

I refer to the following:

(a) During the course of 2010, Jon Brunner had said to Claire Brunner that ‘he would like the opportunity to join Donkey Wheel again when things had settled down with his family’.

(b) Jon Brunner did not attend any board meetings from July 2015 onwards. Nor did he attend any other meeting or function of or at Donkey Wheel save for the 120th birthday celebrations. I note his absence from board meetings is in contrast to his application for a hub at Donkey Wheel House from which he conducted his personal business from early 2011 onwards.

(c) Jon Brunner did not attend the February 2011 retreat.

(d) In February 2011 and thereafter, Jon Brunner did not request an extension of his leave of absence, nor did he request further time to consider his position.

(e) Jon Brunner did not complain about the lack of board papers he failed to receive after the end of December 2010.

(f) Jon Brunner did not join issue with the reference to his retirement in the draft directors’ report for the year ended 30 June 2010 which included the entry for Jon Brunner as ‘ceased 30 June 2010’. Jon Brunner contended that he did not receive a copy of that document, citing his common explanation that documents were provided to the wrong address. I do not accept that.

(g) Up until 23 June 2015, Jon Brunner’s solicitor had been corresponding with Michael Witt (who was a director of Donkey Wheel at all material times) about various family issues, but not Donkey Wheel issues. Jon Brunner’s agitation that he had not resigned as a director did not commence until after the death of Claire Brunner in August of 2015.

(h) By requisition for the general meeting 4 January 2016, Jon Brunner sought ‘appointment’ as a director of Donkey Wheel. However, I accept that the requisition was provided at a time Jon Brunner maintained that he had never resigned as a director of the Donkey Wheel board.[68] Nonetheless, ‘appointment’ was sought.

(i) I accept that Jon Brunner did not instruct his proxy (his solicitor) to vote in favour of the resolution seeking appointment as a director for tactical considerations. However, I take it that those instructions reflect the position that he accepted that he was not a director.

[68]See letter dated 22 December 2015 from Brunner’s solicitors to Michael Witt.

Plaintiff’s conduct consistent with acceptance of oral resignation

On 14 December 2010, David Piggott, as a director of Donkey Wheel, signed a Form 484 recording that Jon Brunner had resigned as a director as at 30 June 2010. That Form 484 was duly filed with ASIC.

From the end of December 2010, the Donkey Wheel board ceased to provide Jon Brunner with board papers.

The directors’ report for the year ended 30 June 2010 recorded Jon Brunner as having ceased to be a director.

The Donkey Wheel special report for 2014-2015[69] did not include Jon Brunner as a board member for the previous five year period.
[69]CB 141.

The Donkey Wheel board did not provide Jon Brunner with notices of resolutions after the board meeting of 15 July 2010.

Given that I conclude that oral notice of resignation was given by Jon Brunner to the two other members of Donkey Wheel in the latter half of 2010, and also accepted by the board of Donkey Wheel by the direction to complete the Form 484 and its lodgement, I do not need to invoke the provisions of s 1322.

Concerning the oral form of the resignation as found above, Jon Brunner’s counsel submitted that the lack of writing as required by clause 12.2(e) of the Donkey Wheel constitution meant that the resignation was irregular and of no force or effect. However, Mr Borsky conceded that the members (but not the directors) of Donkey Wheel could waive the requirement for writing. I do not accept that proposition as clause 12.5 of the constitution reposes the powers and duties for managing the company’s business and affairs upon the directors. That provision also provides that the directors are responsible for managing the company’s business and affairs to the exclusion of the company in general meetings save as required by the Act or the Donkey Wheel constitution. That supports the plaintiff’s contention that it is appropriate for the directors to determine the form of resignation which may be appropriate in the circumstances. In any event, I do not need to decide that issue given that the resignation was communicated to the only two other existing members of Donkey Wheel at the time.

To the extent necessary, I would have made an order under s 1322(4), declaring that:

(a) the resignation by Jon Brunner as a director of Donkey Wheel was not ineffective by reason of its failure to be written;

(b) that the lodgement of the Form 484 dated 14 December 2010 was not invalid by reason of the resignation recorded not being in writing.

In coming to the conclusion that such declarations ought to have been made if appropriate, I have taken into account the following:

(a) the form of the resignation was essentially of a procedural nature;

(b) each of Jon Brunner and the board and members of Donkey Wheel, at the time the resignation was tendered and accepted, did not fail to act honestly;

(c) that it is just and equitable that the order be made.

Donkey Wheel had conducted its affairs as if Jon Brunner was not a director of Donkey Wheel from December 2010 to the date of making this application. Further, Jon Brunner did not seek to participate in the affairs of Donkey Wheel until the requisition calling for the general meeting at the beginning of 2016. I make that observation notwithstanding that Jon Brunner’s solicitor raised the issue of resignation in the email transmission of September 2015. Further, although denied by Jon Brunner, there is strength in the argument that Jon Brunner’s position was motivated by his desire to wrest control of Donkey Wheel. Although I do not accept that that desire to wrest control was motivated for financial gain, I cannot dismiss the inference that that was the purpose by reason of seeking the removal of all current directors and the secretary by the requisition for the general meeting and the appointment of himself and his solicitor in their stead.

There would be no ‘substantial’ injustice by reason of making the order. Jon Brunner did not identify any ‘substantial’ injustice. To the contrary, not holding the position of a director does not detract from his status as a member of Donkey Wheel. It is difficult to identify any prejudice, let alone substantial prejudice, once fiscal considerations are discounted. Alternatively, if I was wrong with that observation, it would militate against Jon Brunner on the just and equitable ground if he was in fact financially motivated.

Further, I have arrived at the determination that Jon Brunner orally resigned his position as director of Donkey Wheel. Making such a determination is also consistent with the regard I had to Jon Brunner’s confirmatory conduct. Accordingly, I did not need to make any credit findings with respect to the oral resignation. However, if required to do so, I note that I would have preferred the plaintiff’s evidence in preference to Jon Brunner’s evidence for the reasons set out in the following two paragraphs.

Each of the plaintiff’s witnesses called for cross‑examination were frank, direct and honest. Further, save for the protection of reputation, it could not be said that any of the plaintiff’s witnesses had any interest in propounding what they did.

In contrast, Mr Brunner seemed as though he had rehearsed his answers, was not willing to make concessions, tended to twist words, disparaged other witnesses, and put his own gloss on the plain meaning of words in correspondence. He sought to justify his position when answering questions rather than just answering the questions put to him. He tailored a story to fit objective evidence.

Appointment of Jane Tewson

The defendant submits that Jane Tewson is not a member of Donkey Wheel. Jane Tewson applied for membership of Donkey Wheel by signing the application for membership form in September of 2015.[70] The application for membership signed by Jane Tewson on 21 September 2015 set out all the formalities of agreement to be bound by the Donkey Wheel constitution and, albeit was not signed by Claire Brunner, it set out the following:

Donkey Wheel Ltd Membership
In the context of the following extract from the Will of Claire Eliza Brunner,
(Clause 9 page 2 of 6)
I give all my shares in Donkey Wheel Limited to Jane Tewson of 35 Cressy St. Malvern.

[70]Exhibit JST-1 (CB382).

Jon Brunner’s counsel contended that the application for membership did not satisfy the requirements of r 9(b) of Donkey Wheel’s constitution in that:

(a) the applicant for membership was not proposed by a member, Claire Brunner having died prior to 21 September 2015; and

(b) the application for membership was not signed by the proposer, Claire Brunner or for that matter, himself.

Jon Brunner’s counsel also submitted that at the date or dates of voting on the resolutions purporting to admit Jane Tewson as a member, there was no member proposing present who had signed Jane Tewson’s application. I accept that to be the case.

Jon Bruner’s counsel also submitted:

When purporting to exercise their powers by voting on the resolutions, the directors gave no consideration to the interests or wishes of Jon, whom they knew at that time was the sole member of the company. Indeed, they voted in accordance with what they understood to be the wishes or intentions of Claire, whom they knew was not a member at the time they were voting.[71]

[71]Defendant’s outline of closing submissions [25].

Jon Brunner’s counsel submitted that insofar as clause 16.2 of the Trust Deed was to be relied upon by the plaintiffs, such clause was not about the regulation of the membership of the Trustee Company. Clause 16.2 of the Trust Deed deals with the discretion conferred upon Donkey Wheel in its capacity as trustee. Jon Brunner’s counsel also submitted that r 12.5 of the constitution was a typical governance provision. Although it confers typical governance provisions concerning the management of the company’s business and affairs by the directors to the exclusion of the members, it says nothing about the requirements of the constitution regulating membership of Donkey Wheel. That is specifically addressed in r 9 of the constitution.

Rule 9 of the constitution is clear and specific in its requirements and no discretion was given to the directors in the particular context in regulating membership of the company. Nothing in the constitution or any other principle law vested in directors a discretion or power to modify or dispense with compliance with the requirements imposed by r 9 of the constitution that an applicant for membership be proposed by a member and that an application for membership be in writing signed by (the applicant and) the proposer.

Jon Brunner’s counsel submitted that, in any event, the provisions of s 1322(6)(a) and (c) as an order under s 1322(4) would cause substantial injustice to Jon Brunner. It was submitted that any validating order made by this Court would allow for the exclusion of Jon Brunner – the last remaining member of the Brunner family who is still a member of the company – from any involvement in the direction of Donkey Wheel and of his family’s charitable trust founded by his late father, Jon senior.

He says that the evidence identifies prejudice to Jon Brunner which is real and not merely theoretical.

Firstly, Jon Brunner’s counsel submits that the admission to membership of Jane Tewson was not an innocent error. The resolution had been passed at a time ‘the directors in this case knew that Jon was the only member of [Donkey Wheel] after Claire passed away and they deliberately wanted to prevent that situation continuing’.[72] Further, ‘the directors knew, before they voted on the resolutions, that Jon’s solicitor had contacted Mr Witt asking for Board papers so that Jon could get back up to speed as a director of the company.’[73] ‘ [The directors] were deliberately trying to avoid the situation in which Jon could control what they knew was his Company, as the constitution unsurprisingly allowed him to do.’[74]
[72] Defendant’s outline of closing submissions [38].
[73] Defendant’s outline of closing submissions [39].
[74]Defendant’s outline of closing submissions [40].

The prejudice relied upon is that:

(a) Jon Brunner as the sole or at least one of only two members of Donkey Wheel is being denied any representation on the Board. The authorities recognise that may give rise to substantial injustice in the requisite sense;[75]

(b) Jon Brunner wishes for his children to become actively involved in the family’s charitable work as soon as they are able. His purported disenfranchisement prevents him from giving effect to that wish.

[75]Dick Convergent Telecommunications Ltd (2000) 34 ACSR 86, [17] (per Windeyer J); ReStatewide Office Furniture Pty Ltd [2015] NSWSC 142, [13],[14] and [17] (per Black J).

Notwithstanding Jon Brunner’s staunch resistance to the application, in cross-examination he conceded that Jane Tewson is eminently qualified and appropriate to be a member of Donkey Wheel but his sole resistance is the lack of adherence to the procedures.

The plaintiff’s position

The primary submission on behalf of Donkey Wheel is that all the requirements for the admission of Jane Tewson to membership were met, namely:

(a) the proposal was constituted by Claire Brunner’s will and codicil, and her oral statements made directly to directors noting that she wanted Ms Tewson to succeed her as a member;

(b) the application for membership was in writing and referred to the extract from Claire’s will which was signed by her when she was a member;

(c) the application for membership was in a form prescribed by the directors;

(d) the application form was signed by Jane Tewson;

(e) the resolution to accept was made by the appropriate people, namely, the directors and not the members.

Rule 9 of the constitution does not contain any temporal requirement, nor is there any basis upon which such a requirement could be implied.

Prior to considering the resolution to admit Jane Tewson to membership, the board of Donkey Wheel had sought advice with respect to the requirements of the constitution. Mr Piggott said:

We assumed the membership would automatically move from Claire to Jane as part of the will, so we assumed that when Claire passed, that membership would automatically go to Jane, we did not need to get involved. That’s what we assumed the will to do.[76]
[76]T88.

Section 1322(4)(a)

Notwithstanding the submissions on behalf of the plaintiff, I determine that upon her death, Claire Brunner ceased to be a member. Accordingly, an order must be made pursuant to s 1322(4)(a) to ratify the appointment of Jane Tewson. During the course of submissions there was a conflation of the concept of a shareholding and membership. Membership could not pass by will and, in any event, I doubt that it is ‘property’. In Milroy v Lord,[77] Turner LJ said:

I take the law of this Court to be well settled, that, in order to render a voluntary settlement valid and effectual, a settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him.

[77][1862] 4 De GF & H 264 (CA), 274-5.

Claire Brunner could have and should have signed a proposal during the course of her lifetime. I have doubts that she could have signed a proposal with it to be held in escrow to be acted upon, upon her death. Further, it is also difficult to resolve the tension between making the nomination during the course of her life with what must be concluded to be a conditional nomination contained in her will and codicil. The condition, being on her death, when she could no longer be considered a member.

Section 1322(2) of the Act

Section 1322(2) provides that a proceeding under the Act is not invalidated because of any procedural irregularity unless 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.

The Court has jurisdiction under s 1322(4) to make, on application by any interested person, or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:

(a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act, or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of the corporation.

Section 1322(6) provides the Court must not make an order under this section unless it is satisfied:

(a) in the case of an order referred to in paragraph 4(4)(a):
(i)that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii)that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii)it is just and equitable that the order be made; and

…
(c)in every case – no substantial injustice has been or is likely to be caused to any person.

The discretionary power conferred under s 1322 is remedial in nature and should be interpreted liberally.[78]
[78]Re Insurance Australia Group Ltd (2003) 128 FCR 581, [27] per Lindgren J citing Re Australian Koyo Ltd (1984) 8 CLR 928, 930, and Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157, 160.

Only one of three sub-paragraphs in s 1322(6)(a) needs to be satisfied in order to grant the order under s 1322(4).[79] The sub-paragraphs are disjunctive and not cumulative.[80] The validation of a contravention may operate retrospectively.[81]
[79]Re Charter Hall Ltd [2007] FCA 1316, [7].
[80]Re Charter Hall Ltd, [7].
[81]Re Wood Parsons Pty Ltd (in liq) (2002) 43 ACSR 257, [52], [61].

In Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd,[82] Palmer J set down the following general propositions regarding the distinction between procedural and substantive irregularities for the purpose of s 1322:[83]

·what is a ‘procedural irregularity’ will be ascertained by first determining what is ‘the thing to be done’ which the procedure is to regulate;
·if there is an irregularity which changes the substance of ‘the thing to be done’, the irregularity will be substantive;
·if the irregularity merely departs from the prescribed manner in which the thing is to be done without a change in the substance of the thing, the irregularity is procedural.

[82](2005) 194 FLR 322, 346 [103].

[83]Ibid.

In this proceeding, the ‘thing to be done’ was the admission of Jane Tewson to membership. The procedure included the requirement for a nomination to be made in writing by an existing member. All other requirements of the procedure had been satisfied, namely, the acceptance in writing and the determination by resolution of the board.

The substance of the ‘thing to be done’, namely, the admission to membership, was not changed by the irregularity. Donkey Wheel’s register of members[84] was updated to record Jane Tewson as a member as from 22 September 2015.
[84]EAS-2.

The irregularity departed from the prescribed manner in which the admission for membership was to adhere. The admission to membership was still considered by the board and accepted.

The concept of ‘acting honestly’ as referred to in s 1322(4)(c)(ii) can include the active but incorrect consideration of a legal issue, as well as the failure to consider the issue at all. In this matter, after considering that the membership passed by the will of the late Claire Brunner, the company consulted with and sought the advice of its solicitors. The receipt of advice and acting upon it is readily apparent from the way that the nomination form is worded by reference to the will. It might well have been that the plaintiff or its solicitors misinterpreted the temporal requirements for a nominating member to still retain the status of membership or whether the provisions of the will could still be relied upon after the death of Claire Brunner.

Gillard J in Jordan v Avram,[85] said:

I accept the conditions in s 1322(6)(a) are not cumulative and that the onus of establishing the fulfilment of one of the conditions and the absence of substantial injustice rests on the applicant: …

[85](1997) 25 ACSR 153, 159.

In Re Colorbus Pty Ltd (in liq); Mentha v Colorbus Pty Ltd (in liq)[86] Mandie J said:

In order to invoke s 1322(4) of the Act, the Court must be satisfied that no substantial injustice has been or is likely to be caused to any person. I am so satisfied. The Court must be also satisfied of one or more of the three matters listed in s 1322(6)(a) of the Act. I am not satisfied in relation to s 1322(6)(a)(i) because the matter is not ‘essentially of procedural nature’. I am not satisfied in relation to s 1322(6)(a)(ii) because there is no evidence that all of the persons concerned in or party to the contravention ‘acted honestly’. There is of course no evidence that Mr Kintsch or anyone else did not act honestly, but there is no positive evidence either, save that I am satisfied that the plaintiffs acted positively (but that is insufficient to satisfy s 1322(6)(a)(ii) in the circumstances. However I am satisfied, in relation to s 1322(6)(a)(iii) that ‘it is just and equitable that the order be made’ …

[86][2004] VSC 486, [24].

I am satisfied that the plaintiff, by a majority of its directors, acted honestly in the circumstances. The directors sought advice. They had regard to the wishes of Claire Brunner while she was alive and as provided for in the will and codicil and had regard to the objectives of the charitable purposes of Donkey Wheel. It was put that I ought not to be satisfied that Donkey Wheel had discharged its onus of demonstrating that no substantial injustice had been or is likely to have been caused to any person or to the Court’s satisfaction that at least one of the three conditions in s 1322(6)(a) was made out.

The directors who gave evidence openly conceded that they did not have regard to the interests of Jon Brunner as a member of Donkey Wheel. However, I accept that that was understandable in the circumstances. Not only did Jon Brunner not discharge his duties as a director from July 2010 up until late 2010 when I determined that he resigned as a director, but he did not interest himself as a member from July 2010 up until after the death of Claire Brunner. It can only be inferred that his queries about directorship were motivated by the death of Claire Brunner and were opportunistic.

It was also put that rather than having regard to Claire Brunner’s wishes, the principal person to whom regard ought to have been made was the wishes of the late John Brunner (Jon Brunner’s father). It is trite to say that those wishes were encapsulated in the constitution of Donkey Wheel and its mission statement. It is clear that the directors had regard to those wishes.

It was put that I could not be satisfied as to the honesty of all the directors involved given that Mr Witt was not called as a witness on behalf of the plaintiffs. Jon Brunner’s counsel submitted that I ought to make a Jones v Dunkel inference by reason of his failure to give evidence.

Jon Brunner relied upon his dispute over the administration of the personal estates and upon a decision in R v Witt (No 2).[87]
[87][2016] VSC 142.

The Witt case was a proceeding for civil contempt. In his reasons for judgment J Forrest J said at [122]:

I accept that Mr Witt is a person of good character and well regarded in the community. I also accept that he is, in normal circumstances, a “hardworking, honest and reliable” solicitor.

Accordingly, although the proceeding reflects upon Mr Witt’s general honesty, it is not as damning as the defendant would have me determine.

In any event, Mr Brunner has not put forward any relevant matters which require contravention by Mr Witt. Mr Witt had not been involved in the preparation of the nomination of Jane Tewson for membership and was only one of the directors who voted in favour at the admission.

If I had to determine the issue, I would have ruled that Jones v Dunkel did not apply. However, I find the issue irrelevant as the onus is on the plaintiff to demonstrate honesty. Albeit that the plaintiff has demonstrated the honesty of the majority of the directors, no material has been filed or adduced in evidence which bears upon the issue of Mr Witt’s honesty, nor that such evidence would run contrary to that adduced from the other directors. I determine that the lack of such material does not dissuade me to find that the directors acted honestly overall. The passing of the resolution to admit to membership did not require unanimity. It was sufficient that the resolution be passed with a simple majority. Accordingly, I can disregard Mr Witt’s vote in arriving at the conclusion that the plaintiff had acted honestly, due to the fact the resolution would have passed nonetheless.

I find that it is just and equitable that the order be made. I do so for the following reasons:

(a) Donkey Wheel would have been rudderless without the appointment of Jane Tewson, Jon Brunner having taken no active part as a member for over five years;

(b) it is clear from an objective reading of the Will and Codicil of Claire Brunner, without reverting to any discussions that had been had with her, that Claire Brunner had the clear intention (note the inducement of the $100,000 in the Codicil) that Jane Tewson become a member;

(c) given that nothing more was done in Claire Brunner’s lifetime, I can only infer that she assumed or considered that the membership would pass by Will;

(d) Paul Steele had witnessed the Will and was aware of the provision whereby the ‘share’ (membership) was to pass to Jane Tewson. If he or members of the Board had anticipated a difficulty with that course after the death of Claire Brunner, they all, including Claire Brunner may have been motivated to nominate Jane Tewson during the lifetime of Claire Brunner;

(e) it is clear that the directors, until receipt of the advice from Donkey Wheel’s solicitors, believed that the membership would pass by Will; and

(f) the directors, after the passing of the resolution granting Jane Tewson membership, continued to carry out the functions of Donkey Wheel in the normal way.

From the material, it is clear to me that Jane Tewson is an eminently suitable and qualified person to become a member in keeping with the objects and mission statement of Donkey Wheel. However, I do not take that fact into consideration in arriving at the conclusion that ratification of the resolution to admit her to a membership is just and equitable in all the circumstances.

Substantial injustice

In considering substantial injustice, Black J said in Khan v Khan; Re Islamic Association Western Suburbs Sydney Inc:[88]

The last point may be disposed of at once. I do not think that s 1322(2) permits the Court to take into account, in determining whether a procedural irregularity has caused or may cause substantial injustice, what is said to be the interests of the company in any commercial sense. Such a consideration would call for the exercise of business judgments. The Court should not enter into the province of the directors and the shareholders in this regard. For the purposes of s 1322(2) an inquiry as to “substantial injustice”, in the context of a shareholders meeting is concerned with whether a shareholders rights to attend and vote have been materially affected, not with whether the result of the meeting would be in the best commercial interests of the company.

[88][2015] NSWSC 638, [86].

In Weinstock v Beck[89] French CJ, referring to Bowen CJ in Eq in Re Compaction Systems Pty Ltd, noted:

…the word “injustice” in this provision requires the Court to consider any real, and not merely insubstantial or theoretical prejudice…it is insufficient to show that there may be some prejudice to a member if, on a consideration of the whole matter, the overwhelming weight of justice, as it were, is in favour or making the order.

[89](2013) 251 CLR 396, [11].

French CJ continued by saying:

Unlike s 366(3), s 1322(6)(c) requires consideration of substantial injustice to “any person” but the general approach enunciated in Re Compaction Systems remains valid. The remedial scope of s 1322(4) is no less than that of s 366(3) insofar as the latter authorised orders which would override the effects of provisions of a company’s constitution.

At [39] French CJ said:

Section 1322(4) and related provision reflect a longstanding legislative recognition that mistakes will happen in corporate governance and that it is not in the public interest that the validity of decisions made in relation to corporations be unduly vulnerable to innocent errors which it may be corrected without substantial injustice to third parties. In accordance with its evident purpose, s 1322(4)(a) is to be construed broadly and applied pragmatically, principally by reference to considerations of substance rather than those of form.

In Khan v Khan[90] Black J said:

Whether there is “substantial injustice” for the purposes of s 1322(6)(c) involves a weighing of the prejudice if the order is made against the prejudice suffered by, relevantly, other members of the association if it is not made: …the onus is on the defendant [applicants] who seek to invoke the operation of this of the section, positively to establish that no substantial injustice has been or is likely to be caused to any person…

[90]Ibid [128].

In William Bernard Andrews v Queensland Racing Limited[91] Wilson J declined to make an order pursuant to s 1322(4). Wilson J referred to Link Agricultural Pty Ltd v Shanahan[92] and said:

As a Director and Member of the Company, the plaintiff is entitled to have the election or appointment of directors decided lawfully in accordance with that statutory contract:…[93]

[91][2009] QSC 338.

[92][1999] 1 VR 466, [20].

[93]Ibid [30].

Wilson J set out:

I consider that the preparation of the Shortlist on the basis that a maximum of four names was required caused a substantial injustice to the plaintiff in that it infringed his personal right to have the Shortlist prepared in accordance with the Constitution (the election of directors had proceeded on the basis that a maximum of four candidates was required. The Constitution did not impose that limitation. The provision required a minimum of four persons.) It also caused injustice to applicants other than those who were included who might otherwise have been included.

Pursuant to clause 9 of the constitution of Donkey Wheel the directors were charged with the responsibility of resolving to accept applicants to membership of Donkey Wheel. At the time of the resolutions to admit for membership, Jon Brunner had not concerned himself with, or taken any interest in, the affairs of Donkey Wheel. He was not a director. He had not attended any meetings of Donkey Wheel since July 2010. In those circumstances I determine that any argument that his ‘personal right’ to have Jane Tewson admitted as a member in the prescribed manner is fatuous in the circumstances.

On that basis I determine that no ‘substantial injustice’ will flow from the making of the order.

If however, a balancing exercising of all the circumstances is required, I would come to the same conclusion. The grounds principally relied upon apart from his ‘personal right’ is that:

(a) not being the sole member of Donkey Wheel, meetings of members would be subject to the casting vote of the Chairman of the Board; and

(b) his purported disenfranchisement prevents him from fostering his children to continue with the Brunner family tradition of charitable work.

As to the first ground, it seems to me that what the real complaint is that he saw the unfortunate death of Claire Brunner as an opportunity to seize complete control of Donkey Wheel. That inescapable inference is corroborated by the resolutions he sought in the notice of meeting which would have, if passed, removed the existing board of Donkey Wheel and replaced it with himself and his solicitor.

Further, the prejudice to Donkey Wheel would be substantial if the resolution was not ratified. Non-ratification would deprive Donkey Wheel of ‘membership’ and leave the same as the ‘alter ego’ of Jon Brunner. The constitution of Donkey Wheel provides for what I would loosely describe as ‘safeguards’. Deadlocks between the members are resolved by the casting vote of the Chairman of the meeting who is a Board member. The Constitution confers the power to conduct the affairs of Donkey Wheel upon the Board. It is inescapable that the various provisions of the constitution would be rendered nugatory if the same was in the sole control of any particular person.

The second ground is easily disposed of, in that any impediment to such fostering, does not arise as a direct consequence of the resolution to admit Jane Tewson to membership. Jon Brunner will continue to enjoy all of the rights conferred on members pursuant to the Constitution. The passing of the resolution to admit Jane Tewson to membership does not impinge upon those rights.

I refrain from comparing the obvious suitability of Jane Tewson as a member with the lack of corporate governance displayed by Jon Brunner. Such comparison may impinge upon the concept of consideration of the interests of Donkey Wheel in a ‘commercial sense’ or involve the exercise of a ‘business judgment’, which Palmer J opined was impermissible.[94]
[94]Cordiant Communications Australia Pty Ltd v The Communications Group Holdings at [86].

Jon Brunner’s counsel sought to elevate the adherence to the constitutional rules to a level higher than that where a corporation served a purely commercial purpose. I did not distil that proposition from the passage referred to in Khan v Khan where Black J said:[95]

Pembroke J made orders determining the then membership of the Association. His Honour referred (at [1]) to the objectives of the Association to which I have referred above and also rightly noted that:
The Association serves an important community purpose. However, like all incorporated associations, the regulation of its affairs requires faithful adherence to the rules of its Constitution, as well as to the applicable statutory provisions.

[95]At [4].

I distil from Black J’s decision that no particular distinction should be made between an incorporated associations or corporations which have different objectives.

Accordingly, in accordance with the originating process I will make orders as follows:

1.Pursuant to s 1322(4)(a) of the Corporations Act, I declare that the admission of Ms Jane Tewson as a member of Donkey Wheel Ltd is not invalid by reason of any contravention of a provision of the Corporations Act or a provision of Donkey Wheel Ltd’s Constitution.
2.I declare that Mark Jonathon Irving Brunner cease to be a director of Donkey Wheel with effect from 30 June 2010.
3.The defendant pay the plaintiffs’ costs of the proceeding, including reserved costs, on a standard basis.

---

[2017] VSC 462

11 August 2017