In the matter of Order of Ahepa NSW Inc

[2019] NSWSC 1329

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of Order of AHEPA NSW Inc. [2019] NSWSC 1329

Hearing dates:

13–15 March 2019

Date of orders:

03 October 2019

Decision date:

03 October 2019

Jurisdiction:

Equity - Corporations List

Before:

Rees J

Decision:

Plaintiffs’ claim dismissed
Declarations made as sought by first defendant
Consequential orders: see [198]

Catchwords:

VOLUNTARY ASSOCIATIONS — Unincorporated and incorporated associations — Effect of incorporation — Whether unincorporated association survives incorporation — Relationship between unincorporated and incorporated associations — Complex federation or affiliation with unincorporated associations on local, state and national level —Meaning of “unincorporated association” in rules of incorporated association — Office-holders of incorporated association identified by reference to rules of unincorporated associations.

 

VOLUNTARY ASSOCIATIONS — Membership — Construction of rules of incorporated association — Original rules provided for transfer of members from previously unincorporated association — Separate pathway for new members — Subsequent amendments obscure this distinction — “Unincorporated association” came to refer to other bodies in federation of unincorporated associations — Where one path provided for voting rights only after end of financial year — Whether second pathway to membership exists independent of this requirement — Where large number of new members allowed to vote immediately — Held that second pathway to membership valid and conferred immediate voting rights.

 

CORPORATIONS — Constitution and replaceable rules — Construction of incorporated association’s constitution — Meaning of term “unincorporated association” changed over time — Approach to construing constitutional document of long standing — Relevance of practice of association — Use of extrinsic material.

 

CORPORATIONS — General meeting — Irregularities — Corporations Act s 1322 as applied to incorporated association — Where proceedings on foot to determine disputed memberships — No notice of meeting sent to disputed members — Some attended and voted with differentiated ballot papers — Membership subsequently accepted — Insufficient notice of special resolution not otherwise complained of — Informal notice by email not complained of — Exclusion of members is substantive irregularity — No substantive injustice where presence of remainder of disputed members could not have altered outcome — Appropriate to validate under s 1322(4).

  CORPORATIONS — Directors’ duties — Duty of disclosure — As applied to committee of incorporated association — Proposal put to general meeting for major development with significant costs — No evidence that information withheld — Any further evaluation could not be paid for absent consent of general meeting — Level of disclosure reasonable — No breach of duty.

Legislation Cited:

Associations Incorporation Act 1858 (SA), Preamble
Associations Incorporation Act 1984 (NSW), ss 10, 15, 19, Sch 2
Associations Incorporation Act 2009 (NSW), s 8, 30A, 39, 95, 96, 97, Sch 2
Associations Incorporation Regulation 2016 (NSW), reg 18
Corporations Act 2001 (Cth), s 5F, 1322
Corporations (Ancillary Provisions) Act 2001 (NSW)
Evidence Act 1995 (NSW), s 160

Cases Cited:

Allen v Townsend (1977) 16 ALR 301; (1977) 31 FLR 431
Atlas Holdings Pty Ltd (as trustee for the Atlas Trust) v Allied Resource Partners Pty Ltd (2017) 122 ACSR 345; [2017] FCA 923
Bull v Australian Quarter Horse Association [2014] NSWSC 1665
Burston v Oldfield [2003] NSWSC 88
Cambodian Buddhist Society of NSW v Thai [2017] NSWSC 1433
Cameron v Hogan (1934) 51 CLR 358
Campolongo v Club Marconi of Bossley Park Social Recreation & Sporting Centre Ltd [2012] NSWSC 750
Carpathian Resources Ltd v Hendriks (2011) 81 ACSR 542; [2011] FCA 41
Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295
Conservative and Unionist Central Office v Burrell (Inspector of Taxes) [1980] 3 All ER 42
Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd (2005) 55 ACSR 185 [2005] NSWSC 1005
ENT Pty Ltd v Sunraysia Television Ltd (2007) 61 ACSR 626; [2007] NSWSC 270
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55
Faehrmann v Van Vucht [2018] NSWSC 397
Fraser v NRMA Holdings (1995) 55 FCR 452; (1995) 127 ALR 543
Hall v Job (1952) 86 CLR 639
Haselhurst v Wright (1991) 4 ACSR 527; (1991) 9 ACLC 728
In re Vernon’s Will Trusts [1972] Ch 300; [1971] 3 All ER 1061
In the matter of New South Wales Leagues’ Club Ltd [2014] NSWSC 1610
In the matter of Order of AHEPA NSW Incorporated [2018] NSWSC 458
Jobnet Employment Services Inc v Copeman (1999) 32 ACSR 554; [1999] NSWSC 848
Johnston v The Greens NSW [2019] NSWSC 215
Kepert v West Australian Pearlers Association (Inc) (1926) 38 CLR 507
Kibby v Registrar of Titles [1999] 1 VR 861; [1998] VSC 148
Lai v Tiao (No 2) [2009] WASC 22
Lewis v Heffer [1978] 1 WLR 1061
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144
Minister of State for the Army v Dalziel (1944) 68 CLR 261
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
MTQ Holdings Pty Ltd v RCR Tomlinson Ltd [2006] WASC 96
Mune v Centro Argentino of Victoria Inc [1996] 2 VR 82
Newey v Westpac Banking Corporation [2014] NSWCA 319
Overall v Family Voice Australia Inc [2014] NSWSC 736
Pacific Carriers Ltd v BNP Paribas (2004) 2118 CLR 451; [2004] HCA 35
Pine Rivers, Caboolture and Redcliffe Group Training Scheme Inc v Group Training Association Queensland & Northern Territory Inc [2015] 1 Qd R 542; [2013] QCA 358
Public Trustee v Cerebral Palsy Association of Western Australia Ltd (2004) 28 WAR 496; [2004] WASC 36
Ray v Eastern Suburbs Motorcycle Club Incorporated [2012] NSWSC 1151
Reel v Holder [1981] 3 All ER 321; [1981] 1 WLR 1226
Re Ferguson (1995) 58 FCR 106; sub nom. Re Giga Investments Pty Ltd (in admin) (1995) 17 ACSR 472
Sir Moses Montefiore Jewish Home v Howell and Co (No 7) Pty Ltd [1984] 2 NSWLR 406
Stratford Racing Club Inc v Adlam [2008] NZAR 329; [2008] NZCA 92
Stratton v Simpson (1970) 125 CLR 138
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52

Texts Cited:

Dal Pont, Law of Associations (LexisNexis Butterworths, 2017)
Ford’s Principles of Corporations Law (LexisNexis, looseleaf)
Stewart et al., The Law of Unincorporated Associations (Oxford, 2011)

Category:

Principal judgment

Parties:

George Lianos (First Plaintiff)
Con Gouros (Second Plaintiff)
Luke Kyprios (Third Plaintiff)

  Order of AHEPA NSW Inc. (First Defendant)
NSW Commissioner for Fair Trading (Second Defendant)

Representation:

Counsel:
M Ashhurst SC with J Willis and D Meyerowitz-Katz (Plaintiffs)
V Bedrossian (First Defendant)

  Solicitors:
McCabe Curwood Lawyers (Plaintiffs)
Kreisson Legal Pty Limited (First Defendant)

File Number(s):

2019/25650

Judgment

1. HER HONOUR:   The plaintiffs are three members of the first defendant, Order of AHEPA NSW Incorporated (AHEPA NSW). “AHEPA” stands for Australasian (or, sometimes, Australian) Hellenic Educational Progressive Association. The second defendant is the NSW Commissioner for Fair Trading, who has filed a submitting appearance. This case is about whether the constitution of AHEPA NSW was validly amended at a meeting in November 2018 and whether resolutions passed at subsequent meetings in accordance with the new constitution — concerning AHEPA NSW’s participation in redeveloping Bexley Bowling Club, about which its members are sharply divided — were also valid. In the event that there is a problem with how the constitution was adopted in November 2018 or subsequent resolutions, then AHEPA NSW seeks orders under section 1322(4) of the Corporations Act 2001 (Cth) declaring that the resolutions are valid nonetheless.

2. This case turns upon the membership rules of AHEPA NSW and who was entitled to vote at the meeting in November 2018. This is the third proceedings to have considered these rules, although the first and second proceedings were resolved by consent and thus not the subject of argument. Put shortly, the plaintiffs contend that before one is entitled to be a member of AHEPA NSW, one must be a member of a NSW “Chapter” of an unincorporated association, The Order of AHEPA Australasia, itself recently incorporated as AHEPA Australia Limited.

3. Three difficulties presented themselves in resolving the issues in this case. First, the foundational documents of AHEPA NSW and The Order of AHEPA Australasia — rules, constitutions, regulations and by-laws — do not align and appear to have been drafted and amended over several decades without the consistent involvement of people qualified to ensure such documents are internally consistent, clear and accurate. The structure of The Order of AHEPA as recorded in these documents was both complex and obscure. The use of defined terms appears to have changed over time, suggesting a loss of corporate memory. Record-keeping has been patchy, with some of the foundational documents going missing for lengthy periods and amendments to foundational documents not being registered with NSW Commissioner for Fair Trading in a timely manner. For about a decade, the members appear to have conducted themselves in a manner not referred to in the documents at all. This has led, over time, to entrenched but not necessarily informed ideas about how things should be done.

4. Second, there was a lack of understanding amongst members as to the nature of unincorporated and incorporated associations, differing views as to what “The Order of AHEPA” referred to, and the extent to which “The Order of AHEPA” in its unincorporated form operated alongside the incorporated association, AHEPA NSW. AHEPA NSW described the confusion as arising “in respect of the interaction and co-existence (or non-existence) of one or more incorporated associations, various of which have been referred to as the Order of AHEPA”. The competing submissions had, on occasion, an ethereal rather than legal quality. Third, the acrimony amongst some members of AHEPA NSW and with the national bodies of The Order of AHEPA may have impinged upon people’s ability to think critically about these subtle matters.

5. In the result, I have concluded that:

1. The membership rules of AHEPA NSW permitted the addition of 124 members before the meeting on 13 November 2018 at which a new constitution and by-laws were adopted.

2. Some members of AHEPA NSW entitled to vote at the meeting were not given notice of it, although most attended anyway. Even if those members had voted against the resolutions, the new constitution and by-laws would have been adopted. An order under section 1332(4) of the Corporations Act is appropriate.

3. It follows that the new constitution and by-laws were validly adopted and registered by NSW Commissioner for Fair Trading, the secretary and treasurer of AHEPA NSW were validly endorsed on 18 February 2019 and the resolutions passed at a meeting on 28 February 2019 were also valid.

6. I hope this judgment clarifies long-standing issues and enables the members of AHEPA NSW to turn their efforts to the admirable objects of the association, including,

to stimulate, promote and practice good fellowship;

to generate the spirit of altruism, understanding, co-operation and benevolence and to establish and encourage a strong sense of tolerance in the Association and society in general

to create an association of men and women with like attitudes of benevolence and good will … in support of the principles of good government and administration.

The amount of time and energy which has been expended in fighting for control of AHEPA NSW and the property development has doubtless been exhausting and expensive, both in monetary and human terms.

Witnesses

7. Seven witnesses gave evidence for the plaintiffs: Demetrios (Jim) Antonakos (a director of AHEPA Australia Ltd), Maria Alexandrou (President of Chapter Arete No. 3), Mary Nagle (Secretary of Chapter Heracles No. 12), George Lianos (longstanding member of the committee of management of AHEPA NSW), Michael Londos (a member of Chapter Heracles No.12), Anthony Alexandrou (a member of Chapter Prometheus No. 6) and Stephanie Andrews (solicitor). Some were cross-examined although the credit of the witnesses was not in issue: Mr Antonakos, Mrs Alexandrou and Ms Nagle were long-standing antagonists of AHEPA NSW and this was apparent in the manner in which they gave evidence; Mr Lianos was a nice man.

8. Five witnesses gave evidence for AHEPA NSW: John Kallimanis (former President of AHEPA NSW), Dr Panayiotis Diamandis (Secretary of AHEPA NSW), Theophilus Premetis (Treasurer of AHEPA NSW), Harry Fandakis (Chairman of the Buildings Committee of AHEPA NSW) and Nick Kagelaris (Secretariat for AHEPA NSW). Mr Fandakis was a pleasant fellow who seemed exhausted by his efforts to advance the property development in the face of significant obstacles. He did not have a clear appreciation of the precise nature of any particular meeting that was held and was subjected to unnecessarily aggressive cross-examination, as was Dr Diamandis who was suggested from the outset to be lying. The plaintiffs did not, in the result, submit that Dr Diamandis was a liar. Whilst his decisions and approach were not perfect, at the end of the day he was a school teacher serving in a voluntary community organisation guided by legal advice.

9. It seemed to me that, on both sides, the witnesses’ interpretations of the membership rules of AHEPA NSW were overly technical when it suited them and otherwise ‘high level’. I was not much assisted by their evidence in the witness box as to what they thought or understood the rules meant.

History of AHEPA

10. Although AHEPA NSW was incorporated in January 1993, the genesis of the association was some 60 years earlier. In 1934, some 30 Australians of Greek heritage gathered at Werris Creek in regional New South Wales and decided to set up a fellowship organisation inspired by the American Hellenic Education Progressive Association, founded in the USA in 1922. The By-laws and Ritual of the American association were adopted to form “The Order of AHEPA”, initially in New South Wales but then also in Queensland and Victoria. Members formed a number of “Chapters” in each state. The over-arching organisational body in each state for the Chapters was called a “Grand Lodge”.

11. In 1954, New South Wales, Queensland and Victoria formed the “Supreme Lodge of Australia" and held the inaugural national convention. Further “Chapters” were formed for women in the 1950s. The over-arching organisational body in each state for the women’s Chapters was called the “District Lodge”. Further Chapters were formed for younger people in the 1970s. The Order of AHEPA came to be established in Western Australia (1965), South Australia (1977) and the A.C.T. (1987).

12. In 1980, Mr Antonakos became a member of The Order of AHEPA and joined Chapter Prometheus No. 6. In 1986, he was elected President of the Chapter and consequently became a member of the Grand Lodge of New South Wales. In 1981, Mrs Alexandrou became a member of The Order of AHEPA and joined Chapter Arete No. 3, a women’s chapter. In 1988, Mr Lianos became a member of The Order of AHEPA and joined Chapter Heracles No. 12. In the late 1980s or early 1990s, Mr Kallimanis joined The Order of AHEPA and Chapter Diogenes No. 8.

13. In 2016, AHEPA NSW described Sydney as the centre of AHEPA activities and initiatives in New South Wales and Australia. Of 35 Chapters throughout Australia, AHEPA NSW described itself as having 11 Chapters and also 8 committees dedicated to special interests such as education, culture and archaeology, golf, Hellenic literature and poetry and bowling. AHEPA NSW owns property in Surry Hills and Rockdale, the latter housing its headquarters and meeting hall. AHEPA NSW’s property is worth some $20 million.

14. The first contemporaneous document in this case is a trust deed executed in 1981 in connection with the purchase of a property in Chippendale. The deed refers to the property being purchased by the trustees on trust for “the Order of AHEPA in the State of New South Wales”. Whether this was a reference to “The Order of AHEPA” in the form of the “Supreme Lodge of Australia”, the “Grand Lodge” of New South Wales or some other embodiment of the Order is not stated. The fact that the Order was specified with respect of “the State of New South Wales” suggests the land was held on trust for the members of the Order in that state.

Constitution and regulations for The Order of AHEPA Australasia 1990

15. In 1990, The Order of AHEPA adopted a Constitution and Regulations for Australia and New Zealand. As these documents have changed little since, it is worth describing the arrangements thereby put in place. Clause 7 of the Constitution provided:

THE AHEPA DOMAIN

7.   The Order in its complete entirety, shall be composed of the following units:

(a)   National Convention

(b)   Supreme Lodge

(c)   State Conventions

(d)   Grand Lodges and District Lodges

(e)   Chapters …

16. The National Convention was described as “the highest constituted body of the Order”: clause 8. It was an overarching “legislative” body with general powers to fix fees and distribute them, establish charitable institutions, amend the Constitution and award honorary membership. The National Convention is convened once a year, and is formed primarily of delegates from Grand and District Lodges and Chapters.

17. The Supreme Lodge is another national body, having an “executive” character. It has power to contract and employ, to settle disputes between state lodges and chapters, and to “interpret and enforce the Constitution”. It is comprised of former Presidents of the Supreme Lodge and Grand Lodges only. It also appoints a variety of office-holders, including a President, who is then eligible to sit on the body in perpetuity.

18. This structure is replicated at the state level. The Grand Lodge is an executive body formed from past and present Presidents of Chapters. A District Lodge holds the same place in the hierarchy, but is constituted by female Chapters known as the “Daughters of Penelope”. The Grand Lodge is to convene a State Convention, made up of all the Grand and District Lodge members, and also delegates from the Chapters in that State, which has a similar deliberative role to the National Convention.

19. In respect of “Chapters” at Clause 22(a):

The Chapter shall be the basic primary and fundamental unit of the Order and each member of the Order shall be a member of a Chapter.

This is the local, regular gathering of members. There are various types: the ordinary Chapter, as well as the female “Daughters of Penelope” Chapters, the junior male “Sons of Pericles” Chapters, and the junior female “Maids of Athena” Chapters. Each Chapter has elected office-holders.

20. Importantly, Part XIV of the Constitution was entitled “Order of AHEPA in the State of New South Wales”. Section 64 provided:

Notwithstanding anything hereinbefore contained the Order of AHEPA in the State of New South Wales (hereinafter referred to as the Order) shall be governed by the following rules …

The Constitution does not describe what The Order of AHEPA in the State of New South Wales was; whether it was the aggregate of the Grand and District Lodges, the State Convention, the Chapters and members of the Chapters or some combination thereof, or something else altogether. But Part XIV does suggest that The Order of AHEPA had a distinct and separate existence in New South Wales from The Order of AHEPA Australasia. This is consistent with the history of The Order of AHEPA, beginning in New South Wales, expanding within New South Wales, expanding to other states and then forming a national body.

21. Rules followed in Part XIV in respect of: keeping a register of members; the keeping, audit and presentation of accounts; the annual general meeting (to be held on the same day as the State Convention); the composition of the Management Committee of the Order of AHEPA in the State of New South Wales (being the officers of the Grand Lodge) and, the composition of Management of Committee of New South Wales Chapters (being the officers elected under the regulations of The Order of AHEPA Australasia). Some rules were different from The Order of AHEPA Australasia and some envisaged an overlap between the Orders going forward in respect of the composition of Management Committees of Chapters and The Order of AHEPA in the State of New South Wales. Part XIV envisaged that The Order of AHEPA in the State of New South Wales, whatever that was, would co-exist with the State Convention, Grand Lodge and the New South Wales Chapters.

21. Although clause 35 of the Constitution gave each of the units of AHEPA the power to appoint trustees to hold property, Additional Rule 7 provided that, for the Order of AHEPA in New South Wales, three trustees would be elected at a general meeting and, in Additional Rule 7(b):

All property of whatever kind belonging to the Order shall be vested in the Trustees and they shall have the custody of all deeds and documents of title relating to the property of the Order and shall be responsible for the same and shall deal with and dispose of all the property of the Order whether real or personal for the time being vested in them and the income thereof in accordance with the directions of the Management Committee provided that such directions are not in violation of the trusts upon which the property is held.

As such, the Constitution added an Additional Rule likely reflective of the fact that the Order of AHEPA in the State of New South Wales already owned property which it would continue to hold in accordance with Additional Rule 7(b) on trust for that Order.

23. Additional, and different, rules were also made in the Constitution for the Order of AHEPA in the State of Victoria, although not for holding property. There would appear to have been no property then owned by the Order of AHEPA in Victoria which warranted particular treatment. This rather suggests that the Order of AHEPA, as it had begun in New South Wales and spread to Victoria, had an independent existence of sufficient longstanding in those states to warrant specific rules to reflect the practices which had been adopted in those states to run their respective associations.

24. The Regulations for The Order of AHEPA Australasia included the procedure for applications for membership of a “Chapter”, which envisaged a committee investigating the fitness of the applicant followed by an interview and instruction of the applicant in the ways of the Order. In the event of a favourable report from the interviewing committee, the application was to be submitted to a Chapter at a meeting and determined by secret ballot. A successful candidate was required to present themselves for initiation into the Order.

25. As I read these foundational documents, there were in fact a number of unincorporated associations in The Order of AHEPA at the time: there were (at least) Chapters, The Order of AHEPA in New South Wales, The Order of AHEPA Australasia and likely other unincorporated associations in other states and territories. The Constitution and Regulations contained a structure or framework in which these unincorporated associations interacted. Unincorporated associations can “affiliate” or “federate” in a larger unincorporated association. As Professor Dal Pont explained in Law of Associations (LexisNexis Butterworths, 2017) at [10.16]:

The relationship between two (or more) unincorporated (or, for that matter, incorporated) associations may instead take the form of a ‘federation’. Here the respective associations retain a separate existence — in a relationship wherein the federal body becomes the ‘servant’ of its constituent associations — reflecting a contractual commitment to a common cause or some other ‘co-ordinating mechanism’, often in the form of a league or the like. In this event, matters of significance to the federation will usually be addressed by representative vote of the associations rather than individual vote of their membership. … Straddling a branch and a federation is an ‘affiliation’, where the relevant associations are distinct but rules of a central association, under the rules of affiliation, control the affiliated associations or at least some aspects of their operation.

26. An example is the Conservative Party in the United Kingdom, considered in Conservative and Unionist Central Office v Burrell (Inspector of Taxes) [1980] 3 All ER 42. The Conservative Party has a complex structure with three elements: the Parliamentary Party comprising members of both Houses of Parliament; the mass membership represented by the National Union of Conservative and Unionist Associations comprising local constituency associations, and the party headquarters knows as the Central Office. These three elements are repeated at three levels — constituency, area and national. At the head stands the Leader of the Party. The National Union provides a meeting place where members of the party come to debate policy and organises an annual party conference attended by representatives of the local constituency associations and other conservative bodies such as the Young Conservatives. It was argued in that case that the National Union was an unincorporated association with its members being all the members of all the local constituency conservative associations. Vinelott J disagreed, at 55:

Counsel … submitted, rightly I think, that, not being a legal person, an unincorporated association cannot itself be a member of another unincorporated association … I can see no reason why an unincorporated association should not agree to send representatives to meet representatives from other unincorporated associations having a common purpose in order to discuss matters of common interest, whether informally or in accordance with some formal constitution, without its members thereby becoming members of a wider unincorporated association. …

27. The similar structure of the Australia Labor Party State of Victoria was described Cameron v Hogan (1934) 51 CLR 358 at 373–4. Another example is the International Amateur Athletic Federation, to which was affiliated numerous national bodies: Reel v Holder [1981] 3 All ER 321; [1981] 1 WLR 1226 (Court of Appeal). In contrast, in Hall v Job (1952) 86 CLR 639, the High Court considered the Loyal Orange Institution of New South Wales, established in 1875, and held that a subordinate Lodge established in Parkes in 1902 under the rules and regulations of the Institute did not exist as an exclusive association but was an integral part of the larger organisation. At 650:

A subordinate Lodge is therefore not to be considered as if it were an association by itself; it is in truth a branch of the Institution, a section of its membership …

Property acquired by the Lodge was thus acquired for the Institution.

28. Whilst the plaintiffs submitted that The Order of AHEPA Australasia bore substantial similarities to Hall v Job, I disagree. The Chapters, Grand and District Lodges and State Convention were not subordinate units of a national body, but distinct entities in their own right, not established by the national body but pre-dating it and with an independent existence. Rather, seems to me that the Constitution of The Order of AHEPA Australasia documents an affiliation or federation of unincorporated associations rather than creates one unincorporated association. The fact that some of these unincorporated associations have since incorporated — some Chapters, The Order of AHEPA in New South Wales and The Order of AHEPA Australasia (which the plaintiffs submitted was the incorporation of the National Convention) — rather confirms that each of these unincorporated associations had a sufficient sense of identity, organisation and continuity (Kibby v Registrar of Titles [1999] 1 VR 861; [1998] VSC 148 at [50]) to incorporate without thereby diminishing the existence of any other unincorporated association within the Order.

29. In 1991, Dr Diamandis became a member of The Order of AHEPA and was initiated into Chapter Heracles No. 12. Dr Diamandis says he has never been a member of The Order of AHEPA Australasia and referred to Chapters as Chapters of The Order of AHEPA NSW, not Chapters of The Order of AHEPA Australasia. The differences in nomenclature used by the parties were indicative of the nebulous nature of The Order of AHEPA and its manifestations. But in reality I think that the Chapters were neither Chapters of The Order of AHEPA Australasia or The Order of AHEPA in the State of New South Wales but simply Chapters in their own right, that is, unincorporated associations which interacted with each other and the other “units” in the AHEPA hierarchy utilising the framework in the Constitution.

Unincorporated and incorporated associations

30. It is timely to say something about the differences between unincorporated and incorporated associations. Unincorporated associations are not recognised by the law as legal entities. As Lord Millett explains in the Foreword to Stewart et al., The Law of Unincorporated Associations (Oxford, 2011), at v:

They do, however, give rise to difficult legal problems. An unincorporated association is not a legal person. Since its existence as an entity distinct from its members is not recognized by the law, it cannot hold property, whether legal or equitable, and a conveyance or lease cannot be taken in its name. Nor, unless it is charitable, is it possible for property to be held on trust for its purposes. It cannot enter into a contract, nor can it be liable in tort, whether directly or vicariously. It cannot be defamed; only individual members can sue for defamation.

Yet such associations do exist in fact, even though not in law.

31. To his Lordship’s summary may be added the following: the association’s rules do not necessarily have contractual force even between the members, unless the members intend to create legal relations between themselves. As such, the basic position at common law and in equity is that the Courts will not intervene in the management of unincorporated associations to enforce those rules. The seminal case of Cameron v Hogan (1934) 51 CLR 358 makes this clear. Per Rich, Dixon, Evatt and McTiernan JJ at 370:

… except to enforce or establish some right of a proprietary nature, a member who complains that he has been unjustifiably excluded from a voluntary association, or that some breach of its rules has been committed, cannot maintain any action directly founded upon that complaint. … One reason … is the general character of the voluntary associations which are likely to be formed without property, and without giving to their members any civil right of a proprietary nature. They are for the most part bodies of persons who have combined to further some common end or interest which is social, sporting, political, scientific, religious, artistic, or humanitarian in character, or otherwise stands apart from private gain and material advantage. Such associations are established upon a consensual basis, but, unless there was some clear positive indication that the members contemplated the creation of legal relations inter se, the rules adopted for their governance would not be treated as amounting to an enforceable contract…

More recent authorities have been assembled and analysed by Ward J (as her Honour then was) in Campolongo v Club Marconi of Bossley Park Social Recreation & Sporting Centre Ltd [2012] NSWSC 750 at [48] ff.

32. The position cited above holds true today in the United Kingdom, except for limited statutory ameliorations. In this jurisdiction, however, these problems are sought to be remedied by the Associations Incorporation Act 2009 (NSW), the Associations Incorporation Act 1984 (NSW), and its predecessors in other states, and in New Zealand, going back to the middle of the nineteenth century. The Preamble to the Associations Incorporation Act 1858 (SA) conveniently sets out what these Acts seek to do:

WHERAS great inconvenience has arisen in cases where property belonging to institutions established for the promotion of religion, education and benevolent and useful objects, has become vested in trustees, by the refusal of such trustees to act, and by the necessity for the frequent change of trustees; and great expense is often incurred by reason of such change, and the appointment of other trustees, and the transfer of such property to such other trustees; and it expedient, for the encouragement of such institutions, to facilitate the incorporation of the same—Be it therefore Enacted…

The benefit of incorporation is that it confers on the previously unincorporated association many of the advantages of the corporate form: the ability to transact in the association’s own name, perpetual succession, so that property, rights and liabilities are held by the association itself, independently of the identity of its members from time to time, and a constitution binding the association and its members as a contract.

33. Importantly, Schedule 2 of the 2009 Act, as applied by section 8 (or Schedule 2 of the 1984 Act as applied by section 15), provides that, on registration, the former unincorporated association ceases to exist: the definition of “former body” as including “an unincorporated body that has been incorporated as a consequence of its registration under this Act” makes this plain. The Schedule provides for the transfer of assets, rights and liabilities and any proceedings to the new incorporated association. Likewise, acts and omissions are taken to be done by the new body, and any reference to the former body in any document is taken to be a reference to the new body. So much was confirmed many years ago in the High Court of Australia in Kepert v West Australian Pearlers Association (Inc) (1926) 38 CLR 507 per Knox CJ, Gavan Duffy, Rich and Starke JJ at 514:

… Upon incorporation the voluntary association ceases to have any existence apart from the incorporated body. There are not two entities existing side by side — a voluntary association and an incorporated body; and the rules when filed become the rules of the incorporated association and subject to the Act regulate the internal economy of the incorporated association and have no separate operation for the management of a voluntary association.

And at 515, per Higgins J:

In my opinion, there is no valid foundation for the theory that after incorporation the association as unincorporated exists or can exercise any powers. By section after section it is made clear that the association when incorporated is the same association as existed before incorporation…

34. More recently, in Faehrmann v Van Vucht [2018] NSWSC 397, Ward CJ in Eq considered whether it is possible for an unincorporated association to continue to exist notwithstanding incorporation. Amongst the authorities collated and analysed by her Honour at [97] ff is Burston v Oldfield [2003] NSWSC 88, where Hamilton J found that the incorporation of One Nation NSW Political Party Inc was not a case of an unincorporated association incorporating at all, but a new association being formed and incorporated for a separate purpose. His Honour Hamilton J observed at [11]:

… it may well be that a separate association was created and incorporated with the same name leaving the original unincorporated association concurrently existing: see Mune v Centro Argentino of Victoria Inc [1996] 2 VR 82; cf Kibby v Santiniketan Park Association Inc [1998] VSC 148; Jobnet Employment Services Inc v Copeman (1999) 32 ACSR 554. It is clear to me on the evidence that that is what occurred in this case. The Incorporated Association was intended to be created for certain financial purposes. The persons who became the members of the new association were the members of the existing State Executive, or a large number of them, rather than all the people who were by then members of the Political Party. …

35. In Munev Centro Argentino of Victoria Inc [1996] 2 VR 82, the Court of Appeal of the Supreme Court of Victoria held that the majority of the members of an unincorporated association did not agree to incorporate and thus, although the incorporated association had the same name as the unincorporated association, it was not in fact the successor to the unincorporated association but was successor to the ad hoc group that met to approve its incorporation: Ormiston JA (with whom Winneke P agreed) at 94; Hayne JA at 95–6. In Kibby v Registrar of Titles, Mandie J held that there was no unincorporated association in existence at all when land was purchased by people who met regularly at a chapel at Ferny Creek to discuss religion and philosophy, and so the property was not held on trust for such an association but, obiter, if it was an unincorporated association, then the majority of its members approved its incorporation.

36. In Ray v Eastern Suburbs Motorcycle Club Incorporated [2012] NSWSC 1151, Ball J found that the unincorporated association ceased to exist when the Club decided to incorporate, but as Ward CJ in Eq noted in Faehrmann at [102]:

… [Ball J] clearly treated this as a question of intention of the incorporators, the answer to which would be indicated by: the contemporaneous documents; the name used (whether it was the same or different to the unincorporated association); and whether the members of the unincorporated and the incorporation association corresponded. (I also note particularly his Honour’s comment at [48], reserving his view about circumstances where “an association was incorporated but the [un]incorporated association did not cease to exist immediately, as in this case”.)

37. A similar review of contemporaneous evidence — correspondence, minutes, bank accounts and conduct — led Windeyer J to conclude in Jobnet Employment Services Inc v Copeman (1999) 32 ACSR 554; [1999] NSWSC 848 that it was intended that an unincorporated association would become incorporated and continue to carry out the work of the unincorporated association as the incorporated association: at [26]. Likewise in Faehrmann, whilst Ward CJ in Eq accepted that it was theoretically possible for the unincorporated association to continue to exist alongside the incorporated association, it was found not to have been established in that case, at [112]:

In the present case there is nothing to suggest that there was any intention at the time of incorporation of The Greens N.S.W. Incorporated to create a separate (and co-existing) incorporated association from the then existing unincorporated association. Indeed the 2002 Constitution (with its references to the Associations Incorporation Act)points to the contrary. It can safely be concluded in my opinion that, on incorporation as The Greens N.S.W. Incorporated in 2002, the former unincorporated association known as The Greens NSW ceased to exist. … 

Curiously, Kepert v West Australian Pearlers Association was not referred to in Faehrmann v Van Vucht, Ray v Eastern Suburbs Motorcycle Club or Burston v Oldfield but suggests, conformably with the conclusions reached by the trial judges in each of those cases, that it would be unusual to find a situation where the unincorporated association continues to exist alongside an incorporated association.

Incorporation of AHEPA NSW

38. In January 1993, AHEPA NSW was incorporated under the Associations Incorporation Act 1984 (NSW). Mr Antonakos and Dr Diamandis were founding members. AHEPA NSW adopted rules, “Rules of Order of AHEPA NSW Incorporated”. It is these rules I have to interpret — as amended in 2003, 2005, 2007 and 2010. The Rules commenced:

PART I – INTERPRETATION

1.   (1)   The name of the Association shall be “ORDER OF AHEPA NSW INCORPORATED” (referred to in these rules as “the Association”).

39. The objects of the AHEPA NSW were described in rule 2: (emphasis added)

(a)   to take over the funds and other assets and liabilities of the presently unincorporated association the Australian Hellenic Educational Progressive Association in New South Wales also known as the Order of Ahepa New South Wales.

(b)   to take over the assets and liabilities of the trustees of the unincorporated association.

(c)   to adopt the objects of the unincorporated association …

The ensuing objects were almost identical to those in clause 3 of the Constitution of The Order of AHEPA Australasia of 1990. The only substantive difference was that references to “members of the Order” in the Constitution of The Order of AHEPA Australasia were replaced in the Rules with “members of the Association”, where the Association was defined as AHEPA NSW. The plaintiffs rely on the identity of objects as indicating that “the unincorporated association” was a reference to The Order of AHEPA Australasia, although I note that the Rules then proceed to set out a further three pages of additional objects of AHEPA NSW which are not in the Constitution of The Order of AHEPA Australasia.

40. The plaintiffs submit that the reference to “the unincorporated association” in rule 2 is a reference to The Order of AHEPA Australasia, “there being no other “unincorporated association” in existence”. For the reasons already stated, I do not think it was the only unincorporated association in existence. Further, the plaintiffs’ submission is at odds with the express reference in rule 2(a) to “AHEPA in New South Wales” and “the Order of AHEPA New South Wales”. In addition, the objects which follow rule 2(c) use the phrase “members of the Association” where Association was defined in the Rules as AHEPA NSW.

41. AHEPA NSW says the reference to an unincorporated association was plainly a reference to the unincorporated existence of the association prior to its registration. I agree, but the question is what that was. Further, APEPA NSW submits that the Chapters were not incorporated in 1993, although some have since been incorporated, and it was these Chapters that constituted, and now constitute, the “unincorporated association”. I do not think that follows. Rather, I consider the reference to the “unincorporated association” in 1993 was to the entity referred to in the 1981 trust deed and Part XIV of the Constitution of The Order of AHEPA Australasia, that is, The Order of AHEPA in the State of New South Wales.

42. This is confirmed by contemporaneous documents. In July 1993, consistently with what was apprehended would occur in rule 2(a) and (b), the solicitor for AHEPA NSW made a statutory declaration in support of an application to change the name of the proprietor of the Chippendale property declaring:

1   I am the solicitor for the Order of Ahepa NSW Incorporated. …

3   The persons presently named as registered proprietors … were formerly Trustees of the unincorporated association prior to its incorporation.

4   Since the date of incorporation they have signified their preparedness to divest themselves of ownership now that the body is an incorporated body and capable of having property recorded in its own name for and on behalf of its members.

It seems to me that the “unincorporated association” referred to in paragraph 3 of the affidavit was that identified in the trust deed of 1981, being “the Order of AHEPA in the State of New South Wales”.

43. In August 1993, an Application to Record Change of Name was completed, including a second statutory declaration by George Kyriazakos, company director, to the effect that AHEPA NSW was now an incorporated association and:

The registered proprietors held the title for and on behalf of the former unregistered association Order of AHEPA New South Wales.

As to whether the “former unregistered association Order of AHEPA New South Wales” was a reference to The Order of AHEPA Australasia or The Order of AHEPA in the State of New South Wales, I think it was clearly the latter. That such an entity existed is consistent with the history of AHEPA: The Order of AHEPA began in New South Wales, gradually expanded into other states and territories of Australia and, in time, formed an overarching national entity, The Order of AHEPA Australasia, but The Order of AHEPA in New South Wales had a continuing and separate existence recognised in Part XIV of the Constitution of the Order of AHEPA Australasia. Further, reference in the two statutory declarations to New South Wales suggests that it was this entity to which reference was made in rule 2.

44. Returning to the Rules, Part II “MEMBERSHIP”, Rule 1 provided: (emphasis added)

Any person who has:

(a)   been a financial member of the unincorporated association for 3 years prior to its incorporation: or

(b)   agrees to be bound by the code of ethics and rules of the unincorporated association adopted in table A.

shall be entitled to be a member of the Association.

PROVIDED however that until such time as a person has been a financial member continuously for three years such person shall be deemed to be an associate member and shall not participate in elections or resolutions until the expiry of three years from the date of joining.

This envisaged existing members of the unincorporated association, The Order of AHEPA in New South Wales, becoming members of AHEPA NSW under sub-rule (a), but also new members joining AHEPA NSW directly under sub-rule (b). The proviso had the result that members joining by either means could only vote on satisfying the same threshold: membership for three years. As everyone becoming a member under sub-rule (a) already met that criterion, the proviso only applied to sub-rule (b).

45. The plaintiffs say that the reference to “the unincorporated association” in rule 1(a) is a reference to The Order of AHEPA Australasia although, consistently with what I have already said, I think it is a reference to The Order of AHEPA in New South Wales. It is implicit in the incorporation of a previously unincorporated association that members of the former unincorporated association are transitioned to the incorporated association, hence reference in rule 1(a) to members of the association “prior to its incorporation”, where “it” was AHEPA NSW.

46. As to rule 1(b), the Rules provided:

BY-LAWS AND ADOPTION OF TABLE ‘A’

47   The Association immediately upon registration shall adopt the constitution and rules of the former unincorporated Association and these shall be the by laws and internal structure of the Association and each individual member shall be bound by them.

48   Where the constitution and rules of the former unincorporated Association conflict with any section of the rules of the incorporated Association the rules of the incorporated Association shall take precedence.

Where rule 47 and 48 refer to “the former unincorporated Association” and “the Association” is defined by the Rules as AHEPA NSW, I think the former incorporated Association is a reference to the Order of AHEPA in the State of New South Wales. The “constitution and rules of the former unincorporated Association” are not in evidence although the plaintiffs submit that these were the constitution and regulations of The Order of AHEPA Australasia. Whilst the Order of AHEPA Australasia did have a constitution at this time, it did not have rules but regulations. I am reluctant to infer that The Order of AHEPA in New South Wales had no constitution and rules before it was incorporated in 1993 from the fact that none were produced 26 years later. Given the long history of the New South Wales organisation, this seems inherently unlikely. And, as will be seen, AHEPA NSW’s record-keeping appears to have been poor.

47. As to who was qualified to be a member of AHEPA NSW, rule 2 provided:

A person is qualified to be a member of the Association if, but only if, –

(a) The persons is a person referred to in section 15(1)(a), (b) or (c) of the Act and has not ceased to be a member of the Association under the Act; or

(b)   The person is a natural person who –

(i)   has been nominated for membership of the Association as provided by rule 3; and

(ii)   has been approved for membership of the Association by the committee of the Association.

As to rule 2(a), the certificate of incorporation of AHEPA NSW was issued under section 10 of the Associations Incorporation Act 1984. As such, section 15(1)(a) of the Act applied with the result that rule 2(a) seems to be a reference to “the persons who were the members of the association immediately before” the date of incorporation.

48. Like rule 1, it seems to me that rule 2 envisaged existing members of the unincorporated association becoming members of AHEPA NSW under sub-rule (a), but also new members joining AHEPA NSW directly under sub-rule (b) through a process of nomination and approval. As to nomination, rule 3 provided:

NOMINATION FOR MEMBERSHIP

3.   (1)   A nomination of a person for membership of the Association

(a)   shall be made by a member of the Association in writing in the form set out in Appendix 1 to these rules; and

(b)   shall be lodged with the secretary of the Association.

(2)   As soon as practicable after receiving a nomination for membership, the secretary shall refer the nomination to the committee which shall determine whether to approve or to reject the nomination.

(3)   Where the committee determines to approve a nomination for membership, the secretary shall, as soon as practicable after that determination, notify the nominee of that approval and request the nominee to pay within the period of 28 days after receipt by the nominee of the notification the sum payable under these rules by a member as entrance fee and annual subscription.

(4)   The secretary shall, on payment by the nominee of the amounts referred to in clause (3) within the period referred to in that clause, enter the nominee’s name in the register of members and, upon the name being so entered, the nominee becomes a member of the Association.

Appendix 1 to the Rules is not in evidence. The committee is “the committee of management of the Association”: rule 12. The fee was $1: rule 8(1), and remains the same today (plus GST). What rule 3 indicates is that new members were nominated by existing members of AHEPA NSW, approved by the committee of management and, on payment of $1 by the applicant, became a member on entry of their name into the register of members. It was process which was self-contained within AHEPA NSW and separate from The Order of AHEPA Australasia.

49. In respect of the register of members, rule 7 provided:

REGISTER OF MEMBERS

7.   (1)   The public officer of the Association shall establish and    maintain a register of the Association specifying the name and    address of each person who is a member of the Association    together with the date on which the person became a member.

(2)   The register of members shall be kept at the principal place of administration of the Association and shall be open for inspection free of charge, by any member of the Association at any reasonable hour.

The secretary of AHEPA NSW, Dr Diamandis, was responsible for maintaining the register of members and did so with the assistance of Mr Kagelaris, the Secretariat for AHEPA NSW, an IT and business administrator by trade. In addition to rule 7(2), rule 38 provided that the records, books and other documents of the Association were open to inspection free of charge by a member of the Association at any reasonable hour.

50. Rule 12 provided for the affairs of AHEPA NSW to be managed by a committee of management comprising the President, Vice-President, Treasurer and Secretary of AHEPA NSW and three ordinary members: rule 13. In respect of the election of office-bearers and ordinary members of the committee of management, rule 14 provided for candidates to be nominated by a member of the Association at the annual general meeting, seconded by another member of the Association and voted for at the meeting. Again, the committee of management was sourced from members of AHEPA NSW, selected by its members with no apparent involvement by The Order of AHEPA Australasia.

51. As to witnesses in these proceedings who were on the committee of management from time to time, either as office bearers or ordinary members:

1. Mr Antonakos, public servant, was President of AHEPA NSW from 1995 to 1997 at the same time as serving as President of the Grand Lodge of New South Wales.

2. Mr Kallimanis, restaurateur, was on the committee from 2001 to 2010 and was President of AHEPA NSW from 2013 to December 2018. He also held various positions in the Grand Lodge of New South Wales including President from 2013.

3. Mr Premetis, chartered accountant, has been the Treasurer of AHEPA NSW since September 2017, and also a member of the committee of management since 2014.

4. Dr Diamandis, school teacher, has been the Secretary of AHEPA NSW since December 2013.

5. Mr Lianos has served on the committee of management from 1997 to January 2018 including as chair.

6. Mr Fandakis, consultant engineer and project manager, has been a member of the committee of management since 2009.

52. The committee of management was entitled to delegate to one or more sub-committees, consisting of such members as the committee thought fit: rule 20. AHEPA NSW has a Buildings Committee of which Mr Fandakis is the Chair.

53. The committee could not exercise functions that were required by the Rules to be exercised by a general meeting of members of the Association (rule 12(b)). Further, a special resolution at a general meeting was required before the committee of management could “sell, purchase, mortgage, charge, lien, borrow, lend, encumber or create any liabilities”: rule 12(d). A special resolution required 75% of members to vote at a meeting of which 21 days’ notice had been given: rule 30(a).

54. The committee of management could call special general meetings whenever it thought fit (rule 24(1)). Where the nature of the business proposed to be dealt with at a general meeting required a special resolution of the Association, 21 days’ notice was required, to be given by the Secretary sending notice by post to the members’ addresses appearing in the Register of Members: rule 25(2). For meetings where the business proposed to be dealt with did not require a special resolution, 14 days’ notice was required: rule 25(1). Questions were to be determined on a show of hands unless a poll was demanded, in which case a poll was to be taken: rule 29. All votes were required to be given personally (rule 31(2)) and a member was not entitled to vote unless all money due and payable by the member to the Association had been paid (rule 31(4)).

55. In Part V, “Miscellaneous”, Rule 40 provided:

SURPLUS PROPERTY

40.   In the event of a winding up of the Association all surplus property of the Association shall vest in The Trustee for the benefit of the members.

“The Trustees” is not defined in the Rules. Additional Rule 7(b) of the Constitution of the Order of AHEPA of 1990 may assist, being rules then prescribed to govern the Order of AHEPA in the State of New South Wales, which provided that the trustees were those elected at a general meeting to hold property for the Order of AHEPA in the State of New South Wales.

56. Section 19(2) and (3) of the 1984 Act provided:

2   The rules of the incorporated association are:

(a)   where the application for incorporation of the association was accompanied by a copy of rules … those rules as altered by the incorporated association from time to time in accordance with section 20 …

3   Where in relation to any matter the model rules makes provision but the rules of an incorporated association do not make provision, the provision of the model rules shall, in relation to that matter, be deemed to be included in the rules of the incorporated association.

57. AHEPA NSW submitted that, as a consequence of section 19 and confirmed by rule 48, the only rules applicable to AHEPA NSW were those lodged with the Corporate Affairs Commission upon registration. This is correct. Part XIV of the Constitution of The Order of AHEPA Australasia ceased to prescribe the rules for “Order of AHEPA in the State of New South Wales”. However, there was nothing to stop AHEPA NSW incorporating the Constitution by reference if it wished.

58. There is no evidence to suggest that the incorporation of AHEPA NSW was not authorised by the members of The Order of AHEPA in the State of New South Wales (Munev Centro Argentino of Victoria Inc) or that it was not a case of an unincorporated association incorporating but a new association being formed and incorporated for a separate purpose (Burston v Oldfield) or that it was envisaged that The Order of AHEPA in the State of New South Wales would coexist with AHEPA NSW. The plaintiffs place weight on Mr Kallimanis’ understanding, described in his affidavit in the first proceedings, In the matter of Order of AHEPA NSW Incorporated [2018] NSWSC 458 (AHEPA No 1), that AHEPA NSW was formed to look after properties owned by the Grand Lodge of NSW and the members of AHEPA in NSW as somehow confining the nature and role of AHEPA NSW. However, Mr Kallimanis did not become actively involved in AHEPA until 1999 — at Chapter level — and became a member of the Committee of Management in 2000, seven years after AHEPA NSW was incorporated. His understanding is thus of little assistance. Further, the Rules of AHEPA NSW go well beyond holding property and extend to membership, management, meetings, money and, to the extent not covered, adopted the model rules. According, it seems to me that in 1993, The Order of AHEPA in the State of New South Wales ceased to exist apart from AHEPA NSW: Kepert v West Australian Pearlers.

59. The Grand Lodge, District Lodge, State Convention and NSW Chapters continued, however, presumably as unincorporated entities within the framework provided by the Constitution of The Order of AHEPA Australasia. In 1995, Mr Antonakos became President of the Grand Lodge of New South Wales and New Zealand. In 1999, Mr Antonakos became Secretary of the Grand Lodge of New South Wales and New Zealand and served in this position until October 2009.

AHEPA NSW 2003 rules

60. In 2000, Mr Kallimanis became a member of the Committee of Management of AHEPA NSW. He asked for a copy of the Rules and no one was able to give him a copy, nor could he find one. It was thought that the Rules had never been registered. In fact, the Rules had been registered but a copy was not retrieved until 2016, and then only from the NSW Commissioner of Fair Trading after a physical search of its archive facility.

61. In any event, in September 2003, a special general meeting was called to adopt the Rules, which Mr Kallimanis was informed were the same as those adopted in 1993. In fact, the rules were substantially revised. Importantly, “unincorporated association” was now defined in rule 1(2)(f):

“unincorporated association” means AHEPA NSW also known as the Order of AHEPA NSW.

This is consistent with my interpretation of the 1993 Rules, that the reference to the “unincorporated association” is a reference to The Order of AHEPA in the State of New South Wales rather than The Order of AHEPA Australasia.

62. Rules 1 and 2 in respect of membership were combined and re-numbered as rule 3. Rule 3 now provided, with changes from the former rules marked:

3.   MEMBERSHIP QUALIFICATIONS

(1)   Any person who has:

(a)   been a financial member of the unincorporated association for three (3) years prior to its incorporation:

or and

(b)   agrees to be bound by the code of ethics and rules of the unincorporated association adopted in Table A.

shall be entitled to be a member of the Association.

PROVIDED however that until such time as a person has been a financial member of the unincorporated association continuously for three years such person shall be deemed to be an associate member and shall not participate in elections or resolutions until the expiry of three years from the date of joining.

(2)   A person is qualified to be a member of the Association if, but only if:

(a) the person is a person referred to in section 15(1)(a), (b) or (c) of the Act and has not ceased to be a member of the Association at any time after incorporation of the Association under the Act; or

(b)   the person is a natural person who –

i   has been nominated for membership of the Association as provided by rule Part II-4(1); and

ii   has been approved for membership of the Association by the committee of the Association.

63. As originally framed, the 1993 Rules brought members of the unincorporated association of The Order of AHEPA in the State of New South Wales into the incorporated entity under rule 1(a) and rule 2(a), and also provided for the admission of new members directly under rule 1(b) and rule 2(b). The two pathways to membership, being for existing and new members, were obvious. The amendments to the Rules in 2003, however, appear to have muddied the waters. In particular, changing “or” to “and” between former rule 1(a) and (b) — now rule 3(1)(a) and (b) — had the result that the rule 3(1) only applied to pre-existing members of the Order of AHEPA NSW “prior to its incorporation” in 1993 and only rule 3(2)(b) provided a pathway for new members.

63. The plaintiffs submit that the reference in rule 3(1) to the “unincorporated association” is a reference to the national body and its membership rules as AHEPA NSW was an incorporated association by this time and thus did not meet the description of an unincorporated association. This submission ignores two things. First, the text in rule 3(1) was first enacted in 1993 when The Order of AHEPA NSW was an unincorporated association and seems to me to have been directed towards bringing the members of The Order of AHEPA NSW into the incorporated association, AHEPA NSW. Second, the submission ignores the definition of “unincorporated association” in rule 1(2)(f). In AHEPA No 1, Black J noted at [9]:

[AHEPA NSW’s counsel] point out that cl 3(1) of the 2003 Rules links membership of AHEPA NSW with membership of the “unincorporated association” – which is defined in cl 1(2)(f), except in so far as the context of subject matter otherwise indicates or requires, as “AHEPA NSW also known as the Order of AHEPA NSW”: [AHEPA NSW’s counsel] submit, and I accept, that “member[ship] of the unincorporated association” within cl 3(1) of the 2003 Rules means membership of the Order of AHEPA as geographically situated in New South Wales, that is, membership of a Chapter of the Order of AHEPA based in New South Wales.

The plaintiffs point to this as consistent with the interpretation that the plaintiffs are now proposing but accept, correctly, that his Honour did not ultimately determine the matters now in issue.

65. Rule 3 in the 1993 Rules became rule 4, with changes to sub-rules (1) and (2) as marked:

4   NOMINATION FOR MEMBERSHIP

(1)   A nomination of a person for membership of the Association,

a)   shall be made in writing by the secretary of the unit of the unincorporated association nominating the person for membership of the Association; and

b)   shall be lodged with the Secretary of the Association.

(2)   As soon as practicable after receiving a nomination for membership, the Secretary shall refer the nomination to the committee for endorsement by the committee.

Materially, new members were now nominated, not by members of the Association, but by the secretary “of the unit of the unincorporated association”, which appears to be a reference to Chapters of the Order of AHEPA. In this amendment, “unincorporated association” appears to now be used in a different sense to refer to “The Order of AHEPA” more generally rather than pre-incorporation entity of The Order of AHEPA in the State of New South Wales. The role of the committee of management is now one of endorsement of the application rather than determining whether to approve or reject the nomination. However, as the plaintiffs note, the requirement in sub-rule 3(2)(b) continued to apply and so approval of the committee was still required.

66. Mr Kallimanis said that he could not recall the procedure in rule 4 being followed while he was on the committee of management. Rather, a person became a member of a Chapter in New South Wales and, each year before the State Convention, each Chapter submitted a list of its financial members as at 30 June of that year as part of its annual reports, including the names of any new members admitted to the Chapter during the year. The list was tabled at the State Convention and adopted by the delegates. At the convention, or shortly afterwards, the Chapters paid to AHEPA NSW $1 plus GST for every new member admitted to the Chapter during the year. The list as approved at the State Convention was then sent to the secretary of AHEPA NSW and became the list of financial members. Once a member had been a financial member of a Chapter for three years, they were treated as a member of AHEPA NSW entitled to vote at the annual general meeting. Mr Antonakos described a slightly different process. Either way, it was a significant departure from the procedure laid down by the 2003 Rules.

67. Rule 5 of the revised 2003 rules provided: (changes marked)

5.   CESSATION OF MEMBERSHIP

(1)   A person ceases to be a member of the Association if the person –

a)   dies;

b)   resigns that membership; or

c)   is expelled from the Association

d)is an unfinancial member of the unincorporated association for a consecutive period of two (2) fiscal years.

Sub-rule (d) is curious. It does not sit well with the definition of “unincorporated association” in clause 1(2)(f), nor with the fact that the Order of AHEPA NSW was incorporated a decade earlier. The term “unincorporated association” appears now to be being used in a manner different from that originally envisaged and has become a reference to a Chapter, or perhaps the Chapters collectively, or perhaps the Grand Lodge or State Convention. The plaintiffs submit that the reference in sub-clause (d) to an “unfinancial member” of the unincorporated association uses the same terminology as Part XI of the 1990 Regulations of The Order of AHEPA Australasia and that this is further evidence that, where the Rules of AHEPA NSW refer to the “unincorporated association”, they are referring to The Order of AHEPA Australasia. There is certainly an overlap of terms and some clauses between the foundational documents, but pointing to similarities (where they exist) does not assist greatly.

68. The 2003 Rules contained equivalent provisions in respect of the Register of Members (now rule 8). The powers of the committee of management remained the same (now rule 13) but the membership of the committee increased to five ordinary members in addition to the office bearers: now rule 14. But an important change was made to the election of office-bearers and ordinary members of the committee of management. Whilst originally each member of the committee of management was nominated by a member of the Association at the annual general meeting, rule 15 now provided:

15.   ELECTION OF MEMBERS

(1)   The committee shall be elected from the following duly elected office bearers or members of the unincorporated association:

a)   Grand President

b)    District President

c)    nominated member from each chapter of the unincorporated association,

(2)   Provided however that:

a)   the duly elected Grand President of the unincorporated association shall automatically be appointed as the President of the Association

b)   the duly elected District President of the unincorporated association shall automatically be appointed as the Vice President of the Association

(3)   The nomination of the member from each chapter of the unincorporated association under clause (1) c) shall occur by way of an election process to be conducted by each of the respective chapters of the unincorporated association in the month of October and advised in writing to the Secretary by the secretary of the chapter of the unincorporated association within fourteen (14) days following the election of the committee member.

69. “Grand President”, District President” and “chapter” were not defined in the 2003 Rules but were terms which would have had a clear meaning to those involved in the activities of The Order of AHEPA through their local Chapter. It is perhaps in the context of this drafting mess that AHEPA NSW’s senior counsel submitted in AHEPA No 1 in respect of the meaning of “unincorporated association” — in the face of its definition — “we take that to mean the membership of the Order of AHEPA geographically situated in New South Wales, that is, Chapters in New South Wales”. In any event, rule 15 now radically shifted the composition of the committee of membership from members of AHEPA NSW to the officers of the Grand Lodge and District Lodge of New South Wales and nominees of the Chapters in New South Wales. The plaintiffs submit that these amendments increased the importance of the “unincorporated association” to the functioning of AHEPA NSW and further incorporated aspects of the Constitution of The Order of AHEPA Australasia into AHEPA NSW’s Rules. The latter proposition is correct insofar as the Constitution of The Order of AHEPA Australasia described how the Grand President and District President were elected, was a Chapter was and who was a member and Secretary of a Chapter, and thus identified the persons who the 2003 Rules then prescribed would form the committee of management.

70. Otherwise, the ability to delegate to sub-committees was now rule 21. The rules in respect of calling meetings remained the same, albeit re-numbered: calling special meetings (rule 24), notice (rule 26), making of decisions (rule 30), special resolutions (rule 31) and voting (rule 32). The right to inspect the books were now in rule 39. Rule 40 in respect of Surplus Property which, it will be recalled, provided that in the event of winding up of AHEPA NSW, surplus property would vest in The Trustees, was removed.

Amendments to the rules of AHEPA NSW: 2005 to 2010

71. Recalling the annual method of recording existing and new members of AHEPA NSW set out at [66], Mr Kallimanis said that the list of financial members that each Chapter submitted with its annual report to the State Convention did not record how long the members had been financial members, whether the member had been unfinancial for a period and, if so, for how long. This made it very hard to work out who was a member of AHEPA NSW or a member entitled to vote. From 2003 to 2005, the committee of management regularly discussed and debated rule 3 and that it was not working. Further, the three year waiting period was considered to be too long and leading to the loss of members.

72. This debate appears to have been misguided as, not only was rule 3 not being applied in its terms but rather by some informal process which appears to have arisen whilst the rules were mislaid, but rule 3 as amended in 2003 did not apply a three-year waiting period to new members but only those were already members on incorporation of AHEPA NSW in 1993. The ham-fisted nature of the 2003 amendments resulted in theoretical unfairness to existing members — I say theoretical as by 2003 all existing members had more than served their 3 year waiting period — but unfairness undetected by the committee.

73. In November 2005, AHEPA NSW’s rules were amended by special resolution. Rule 3 became:

3- Membership Qualification

(1)   Any person who has

a)   been a financial member of the unincorporated association on 30 June of the last financial year.

and

b)   agrees to be bound by the code of ethics and rules of the unincorporated association.

shall be entitled to be a member of the Association.

The distinction between an associate member and one entitled to vote was also removed. The minutes of the annual general meeting at which this motion was passed do not shed any light on the amendment. The metamorphosis of rule 3 had continued since its original function in 1993, being to transition members from The Orders of AHEPA in the State of New South Wales into AHEPA NSW. The rule now reflected the practice described in [65] of AHEPA NSW adopting the annual lists of financial members submitted by the Chapters to the State Convention as its register of members. The reference to “unincorporated association”, at least in rule 3(1)(a), is to Chapters. Another curious feature of this resolution is that, although it was passed in 2005, it was not registered until 2018 and then only after the first proceedings, AHEPA No 1.

74. According to Mr Kallimanis, after this amendment the Chapters continued to submit their annual report to the Grand Lodge before the State Convention including a list of financial members as at the end of 30 June of that financial year: this was then approved as the list of members in New South Wales at the State Convention. The list was sent to AHEPA NSW and became the list of members of AHEPA NSW for the next financial year. Members on this list were entitled to vote at AHEPA NSW’s general meetings. AHEPA NSW did not have a separate Register of Members. Mr Antonakos described a slightly different process.

75. On 29 November 2007, rule 14 of the 2003 Rules was amended to expand the number of ordinary members of the committee of management to “such number of ordinary members as corresponds to the number of Active Chapters of the unincorporated Association”. “Active Chapters” was not defined in the AHEPA NSW rules although the 1990 Constitution of The Order of AHEPA Australasia dealt with inactive chapters in clause 102. Again, it seems that the term “unincorporated association” or the amalgam “unincorporated Association” was now being used in a way different to that originally intended in 1993. This resolution was also not registered until 2018. In AHEPA No 1, Black J noted at [14]:

… The evidence led by AHEPA NSW indicates that the purpose of this amendment was to permit each Chapter of AHEPA NSW to nominate a representative to the Committee of Management, where the number of Chapters had increased (Kallimanis [74]-[79], [81]).

76. In 2009, Mr Antonakos was elected as National President of The Order of AHEPA Australasia.

77. On 22 January 2010, AHEPA NSW again amended its rules to add back to rule 3(1) “Membership Qualifications”:

PROVIDED however that until such time as a person has been a financial member of the unincorporated association on the 30th June of the last financial year, such a person shall be deemed to be an associate member and shall not participate in elections or resolutions.

That is, an “associate member” was reintroduced but with a shorter period of up to one year, depending on their date of membership. Again, the term “unincorporated association” seems to now be being used in a manner different to that intended when the term was first introduced in 1993 and now refers to a Chapter. Although the minutes of the annual general meeting record that Mr Antonakos gave an explanation of the amendment “and the history of the Membership Qualifications”, the history is not set out in the minutes. This resolution was also not registered until 2018. In AHEPA No 1, Black J noted at [17]:

[AHEPA NSW’s counsel] point out that that amendment was in one sense misconceived, since the 2005 resolution amending cl 3(1) of AHEPA NSW’s constitution had purportedly removed the proviso at the foot of cl 3(1). However, a 2007 consolidation of the constitution had not reflected that change by deleting the proviso as originally set out in the 2003 Rules … and the amendment appears to have been passed on an assumption that the proviso remained in cl 3(1), and to have conformed that proviso to the change to cl 3(1)(a) made in 2005 … thereby reinstating the proviso in an altered form.

Order of AHEPA Australasia constitution and rules 2010

78. In 2010, the constitution and regulations of The Order of AHEPA Australasia were amended, the latter now called By-laws. The constitution, again, contained its own provisions for trustees (now Part VII) and, perhaps curiously, additional rules for The Order of AHEPA in the State of New South Wales. The Additional Rules now noted:

The Order of AHEPA NSW Incorporated has adopted this Constitution and By-laws.

Where this Constitution and By-laws conflict with the rules of AHEPA NSW Incorporated, the rules of AHEPA NSW Incorporated shall take precedence.

The Additional Rules in respect of trustees remained unchanged. Additional Rules were provided for Victoria but not Queensland, the constitution recording that “Queensland does not require additional rules as long as the original Principles and Objects remain unchanged”.

79. The drafters of the 2010 constitution of The Order of AHEPA Australasia do not appear to have appreciated the implications of the incorporation of AHEPA NSW and simply retained the Additional Rules from the 1990 constitution without amendment, apart from referring to The Order of AHEPA in the State of New South Wales as AHEPA NSW Incorporated. Before passing on from this document, it should be noted that the Additional Rules were not the same as AHEPA NSW’s rules. In respect of the register, funds and authorisation of accounts, AHEPA NSW’s rules were more detailed although not necessarily inconsistent. In respect of the financial year, audits and trustees, the Additional Rules had no comparable in the AHEPA NSW’s rules. In respect of the annual general meeting and distribution of surplus property on dissolution, AHEPA NSW’s rules were inconsistent with the Additional Rules. Overall, the Additional Rules appear to have been written without regard to the rules of AHEPA NSW.

80. Like the 1990 Regulations before it, the 2010 By-laws contained Part X in respect of the admission of new members to Chapters. The process of application, investigation and interview was, essentially, unchanged. As before, in the event of a favourable report from the interviewing committee, the application was to be submitted to the Chapter at a meeting for voting. As before, a successful candidate was required to present themselves for initiation into the Order. Dr Diamandis says the interview procedure has not been used for many years, and I am inclined to accept that evidence as inherently likely.

The struggle begins

81. In about 2010, the committee of management of AHEPA NSW reviewed its future. The average age of members of AHEPA NSW was then between 65 and 70 years. Less than 10% of members were under 50 years of age. The number of active members was about 300. Mr Fandakis was then a member of the committee of management and expressed a concern that the majority of members chose not to be involved in the activities of AHEPA NSW as they did not find the organisation interesting or engaging. It was thought that one of the main reasons why members did not attend events was because AHEPA NSW’s headquarters on the Princes Highway at Rockdale did not have modern facilities or parking. This was thought to be unacceptable, particularly where AHEPA NSW had assets worth some $20 million. It was thought that, to better secure the future of the organisation, AHEPA NSW should establish new headquarters capable of attracting more new and younger members. From 2011 to 2014, the committee of management explored various options.

82. In March 2015, the Grand Lodge of New South Wales was said to have seceded from The Order of AHEPA Australasia and informed the National Lodge of this fact in May 2015. Legal advice was obtained and the National Lodge decided to expel Mr Kallimanis, then President of the Grand Lodge, for breaches of the Constitution. In June 2015, the president of the National Lodge met with the Grand Lodge of New South Wales to try to negotiate their differences.

83. In October 2015, at the National Convention of The Order of AHEPA Australasia, the chairman gave an opening address defending the continuing relevance of the ideals of the Order as “NOT antiquated” and noted:

It is disappointing that the Grand Lodge of NSW is not involved, they have decided to hold their State Convention at a time which firstly, is Unconstitutional and is a deliberate act of insubordination. …

The National Lodge over the last 2 years and in particular the previous 12 months, has been challenged and subjected to un-AHEPAN behaviour from some Grand Lodge members in NSW.

Deliberate acts of harassment were said to have been engaged in towards the women’s Chapters in New South Wales and a motion was moved, but lost, that the District Lodge come under the jurisdiction of the National Lodge. A further motion was moved and carried:

That any AHEPA incorporation or entity in Australia must fully adopt the Constitution and By-Laws of the unincorporated association, namely the Order of AHEPA Australasia, in order to be permitted to use the trade mark, name and logo.

84. Further, it was resolved:

To unify AHEPA and have One Head of the Association in each State and Territory by establishing a STATE COUNCIL as the highest executive body which will comprise of all past and present Grand & District Lodge presidents and past and present Chapter presidents, with the executive elected at the State Convention/AGM. Only past Chapter Presidents qualify for election to the State Council executive.

174. On 22 November 2018, AHEPA NSW’s solicitors wrote to the solicitors for the plaintiffs in the second proceedings accepting that each of the persons in the represented group were entitled to membership and that their names already appeared in the Register of Members. AHEPA NSW accepted that all of those persons had the same membership rights as every other member of AHEPA NSW.

175. On 29 November 2018, NSW Commissioner for Fair Trading emailed AHEPA NSW indicating that several representations had been received about the management of AHEPA NSW and the validity of the meeting on 13 November 2018. Notice of 21 days was said not to have been provided in some instances or at all. It had also been asserted that some of the committee’s actions were not consistent with their statutory responsibilities and that internal disputes were impacting on the operation and corporate governance of the association. On 5 December 2018, NSW Commissioner for Fair Trading sought confirmation that notice of the proposed special resolution had been provided to members and that the process undertaken in respect of passing the special resolution to adopt the new constitution complied with the Act, the current constitution and the law generally. AHEPA NSW’s solicitor provided the assurances sought.

176. On 10 December 2018, the second proceedings were resolved by the entry of consent orders. The Court declared that each of the plaintiffs and the persons who they represented were members of AHEPA NSW and entitled to have their names recorded on the Register of Members. Dr Diamandis said that, after these orders were made, these members were included in the Register of Member, being the members to whom pink ballot papers had been issued if they had attended the special general meeting.

177. On 17 December 2018, Council followed up Mr Fandakis as to the registration of a new constitution and the new members’ endorsement of the proposal for Bexley Bowling Club. A meeting was requested to obtain an understanding of AHEPA NSW’s adherence to the time frames in relation to proving AHEPA NSW’s financial capability to carry out the works, providing design detailed documentation and a firm date for lodgement of a development application. A meeting was arranged for 20 December 2018.

178. On 18 December 2018, the new Constitution and By-laws were registered by NSW Commissioner for Fair Trading. By reason of my earlier conclusions as to the validity of the resolutions passed on 13 November 2018, it follows that the registration was valid and correct.

179. On 20 December 2018, AHEPA NSW and the Council met. After the meeting, Council confirmed key dates to be adhered to: detailed floor layout plans, project management methodology, project scope and team by 21 January 2019 to be discussed at a meeting on 22 January 2019; detailed funding model by 28 January 2019 to be discussed on 29 January 2019; and all required documentation to lodge the development application by 30 April 2019. The Council concluded:

Please note that due to the nature of time lapsed well beyond what was initially envisaged, if the above dates are not adhered to we may reconsider our offer to AHEPA for potential works licence to undertake development works at the subject site, 72 Laycock St Bexley North, and subsequent lease of the site. We are more than happy to assist where required and provide any guidance as requested, however we need to be in a position to demonstrate considerable effort has been made by AHEPA to progress this project when the matter is put before council in early Feb 2019.

Calling meetings to approve the development

181. The new Constitution of AHEPA NSW enables the committee of management to deal with property with a resolution of members in general meeting, but no longer requires a special resolution. On 10 January 2019, the committee of management of AHEPA NSW sent an agenda to members inviting them to attend the annual general meeting on 28 January 2019. The notice proposed the following motion:

The members authorise the Committee of Management to perform all such acts and do all such things as appear to the Committee of Management to be necessary or convenient to finance the development of the project, including construction of any new buildings in Bexley North Bowling Club; additionally, the members authorise the Committee of Management to execute any Joint Venture, lien, mortgage, or sell any AHEPA property, as it may become necessary for the completion of the project.

182. On 13 January 2019, Mr Antonakos as secretary of Chapter Apollon No. 16 sent a letter enquiring why its representative (him) was not being invited to attend meetings of the committee of management. Dr Diamandis says this was because the meeting of the committee of management on 13 December 2018 discussed the outcome of the second proceedings in which Mr Antonakos was a witness for the plaintiffs.

183. On 22 January 2019, AHEPA NSW met with Council officers and provided concept plans. The project was to be placed before the Council at its next meeting in early February 2019 and Council officers requested that AHEPA NSW provide a detailed funding model to complete the project by 1 February 2019 including a statement of financial position, proof of equity, anticipated project cost by major work stages and a breakdown of funding sources for major work stages. A meeting with Council was proposed on 4 February 2019 to discuss funding strategies.

Third proceedings

184. On 22 January 2019, solicitors for the plaintiffs in these proceedings wrote to the Secretary of AHEPA NSW objecting to the resolution being put to the annual general meeting as the information provided to members was said to be manifestly deficient. Complaint was made that the members had never been provided with documents with, so far as I can tell, did not then exist, being a proposed development application, proposed lease, quantitative survey in respect of the cost of the project, finance plans or professional advice. It seems to me that the committee of management had been distracted by its efforts to achieve a mandate for the proposal and install a workable decision-making structure going forward from attending to the substantive tasks in progressing the development. The solicitors suggested, on a basis that is not clear to me, that AHEPA NSW was engaged in an “apparently deliberate attempt to conceal all particulars” concerning the project sufficient to amount to a breach of section 30A of the Associations Incorporation Act 2009 as well as fiduciary duties owed to members of the association. In addition, the solicitors suggested that a large number of the votes cast at the 13 November 2018 special general meeting were by members not entitled to vote and thus the new constitution had not been passed. A copy of the Register of Members was sought or, failing that, inspection of it. The plaintiffs said they would approach the Duty Judge to seek injunctive relief unless AHEPA NSW agreed not to put the proposed resolution to the meeting on 28 January 2019 and to provide the Register of Members and supporting documents in respect of each recent member.

185. On 24 January 2019, these proceedings were commenced before the Duty Judge, Lindsay J. Affidavits in support were filed by Ms Nagle, Mrs Alexandrou, Mr Lianos and Mr Antonakos. On 25 January 2019, by consent, Lindsay J ordered an interlocutory injunction preventing AHEPA NSW from proposing or permitting voting on motions in respect of the Bexley Bowling Club at the meeting on 28 January 2019. The meeting took place but the resolution was not discussed.

186. On 1 February 2019, AHEPA NSW provided a preliminary funding scenario to the Council. It comprised a list of possible options subject to approval of AHEPA NSW’s members including borrowing against the equity of AHEPA NSW’s properties at Rockdale or Surry Hills, negotiating a joint venture or selling AHEPA NSW’s properties in Rockdale and borrowing part of the cost. Preliminary discussions were said to be underway with other parties and once a suitable scenario was reached, they would request members’ approval. I suspect the information submitted to Council was far less detailed than what was sought but, in the circumstances, there was little AHEPA NSW could do given its inability to discuss the matter at a meeting of members.

187. On 7 February 2019, AHEPA NSW attended a further meeting with the Council. Following the meeting, Council sent an email requesting a current market valuation of the properties AHEPA NSW wished to borrow against to fund the project, audited financial statements, a statement of loan balances for loans against any properties owned by AHEPA NSW and a summary of what was expected from a meeting scheduled for 27 February 2019 and the upcoming hearing in the third proceedings. Whilst the Council officer noted that the delays to date had been caused by AHEPA NSW’s internal disagreements and subsequent inability to resolve to proceed with the project,

It is important that we eliminate any excess delays beyond this point as it may start to compromise Council’s confidence in the project proceedings.

188. On 11 February 2019, AHEPA NSW issued a notice of general meeting to take place on 28 February 2019 proposing the following motions:

1)   That this meeting notes the contents of the Information Memorandum, as attached;

2)   That the Committee of Management be authorised to proceed with negotiations with Bayside Council regarding the project at 72 Laycock Street Bexley North (Bexley North Bowling Club); and

3)   that the Committee of Management be authorised to obtain funds not exceeding seven million dollars (AUD$7M) for the construction and completion of Stage 1 of the project.

Attached to the notice was a three-page information memorandum describing the deficiencies in AHEPA NSW’s current premises, the history of AHEPA NSW’s efforts to obtain better premises, the progress of the tender to the Council and the current proposal for Bexley Bowling Club. The information memorandum noted that the Council required a complete development application to be lodged no later than 30 April 2019 and the next step was to engage planning, architectural, engineering and specialty consultants to prepare it. At the same time, Council would prepare the lease documents to be reviewed by AHEPA NSW’s solicitors.

189. Mr Fandakis said that the latest preliminary floor layouts had been made available for inspection at the AHEPA headquarters, Monday to Friday, from 3.00 to 8.00 pm, from 13 February 2019 onwards. Mr Fandakis said:

Whenever there was a meeting for the members, the documentation that was applicable to that meeting was placed - was physically tabled next to the attendance book and every member that attended the meeting had an opportunity to inspect whatever documentation was pertinent to the meeting …

Endorsement of secretary and treasurer of AHEPA NSW

190. On 18 February 2019, a meeting of the committee of management endorsed Mr Diamandis as Secretary and Mr Premetis as Treasurer of AHEPA NSW. The plaintiffs submit that under rule 15, the Secretary and Treasurer are to be elected by the committee of management by ballot rather than “endorsed” as they appear to have been. Further, as Dr Diamandis has never been a member of The Order of AHEPA Australasia, the plaintiffs submit he is not eligible to be appointed as secretary of AHEPA NSW.

191. By reason of my earlier conclusions as to the validity of the resolutions passed on 13 November 2018, it follows that the procedures for appointment of a treasurer and secretary under the new constitution were the ones to be followed. Whilst the former rules provided for the committee of management to elect its office-bearers, apart from the president and vice-president, from its members, the new constitution provided that the President, Vice-President, Treasurer and Secretary of the Grand Lodge hold the same roles in AHEPA NSW ex officio. Consistently with this, office-bearers in the committee of management were “endorsed” rather than elected.  Whilst AHEPA NSW did not put on clear evidence that Mr Premetis and Dr Diamandis were, after the State Convention held on 2 December 2018, the Treasurer and Secretary respectively of the Grand Lodge of New South Wales, I infer it from the minutes of meeting of AHEPA NSW thereafter.  They were thus correctly endorsed as the Treasurer and Secretary of AHEPA NSW on 18 February 2019.

192. On 20 February 2019, the plaintiffs’ application for an interlocutory injunction to prevent the meeting on 28 February 2019 was determined, largely by consent, on terms to enable AHEPA NSW to obtain the funding needed to meet Council’s requirements to lodge a development application and thus keep the commercial opportunity at Bexley Bowling Club alive until these proceedings were finally determined. AHEPA NSW gave an undertaking that, if the third resolution was passed at the meeting then AHEPA NSW would only expend up to $375,000 for the purpose of preparing reports to lodge a development application with the Council for Stage 1 of the development at Bexley Bowling Club, such funds to be raised from an authorised deposit-taking institution and secured by a mortgage against the Surry Hills property.

Meeting on 28 February 2019

193. On 28 February 2019, a special general meeting was held. The minutes of meeting suggest it was a tumultuous affair. Anthony Alexandrou, a member of Chapter Prometheus No. 6 and husband of Mrs Alexandrou, received the notice of meeting and information memorandum in the post on 15 February 2019. On arriving at the meeting, his name was marked off a list of members by Mr Premetis and on a laptop by Dr Diamandis and given a ballot paper. The meeting was chaired by the new President of AHEPA NSW, Bill Skandalakis. Two members spoke in favour of the motion and two against, being Mr Lianos and Mr Alexandrou. Mr Premetis and Mr Alexandrou counted the votes with scrutineers.

194. The resolutions passed with 72.48% of the votes cast: 189 members voted, 137 in favour and 52 against. It is not known which of the members who voted in favour of the resolutions were amongst those endorsed by the committee of management on 11 October 2018 nor, for the reasons given, does it matter. Under the former constitution, 21 days’ notice would have been required for this meeting, along with75% of the vote. AHEPA NSW accepts that, if the Court concludes that the adoption of the new constitution in November 2018 was invalid, then the resolutions passed at this meeting were rendered invalid. By reason of my earlier conclusions as to the validity of the resolutions passed on 13 November 2018, it follows that these resolutions were validly passed.

195. The plaintiffs object to the third resolution on the basis that the committee of management substantially failed to make full and fair disclosure of all facts and material to enable members to determine whether to vote on the resolution. The information memorandum did no more than set out the nature of the project in broad terms. The committee failed to inform the members of the manner in which funding was proposed to be obtained, the extent to which it was proposed that any assets would be sold or encumbered and the terms on which this was proposed to occur, the estimated costs and duration of the project or the estimated financial impact of the project on the association based on an independently prepared feasibility study. The plaintiffs submit that the members of the committee of management breached their fiduciary duties.

196. Accepting that the members of the committee of management owed fiduciary duties to the members of the association (Lai v Tiao (No 2) [2009] WASC 22 at [577]; Pine Rivers, Caboolture and Redcliffe Group Training Scheme Inc v Group Training Association Queensland & Northern Territory Inc [2015] 1 Qd R 542; [2013] QCA 358 at [39]; Stratford Racing Club Inc v Adlam [2008] NZAR 329; [2008] NZCA 92 at [58]; Haselhurst v Wright (1991) 4 ACSR 527; (1991) 9 ACLC 728; Allen v Townsend (1977) 16 ALR 301; (1977) 31 FLR 431) and that this encompassed a duty of disclosure (Fraser v NRMA Holdings (1995) 55 FCR 452 at 466; (1995) 127 ALR 543 at 554, per curiam) there are two problems with the plaintiffs’ complaint.  The first is that the documents which the plaintiffs say should have been provided did not, so far as I can see, exist. It was not misleading to withhold documents which did not exist unless, perhaps, it was suggested by the committee that the documents existed.  As Austin J noted in ENT Pty Ltd v Sunraysia Television Ltd (2007) 61 ACSR 626; [2007] NSWSC 270 at [21]:

The Full Federal Court's decision in Fraser v NRMA Holdings Ltd is authority for the proposition (stated at 466) that “a proper discharge of the duty may require that the directors take reasonable steps to ascertain relevant information for communication to members if that information is not known to the board”. That, in turn, is qualified by the proposition that in considering whether the directors should seek out additional information, it is relevant to take into account the time and cost of acquiring and preparing such information, and the delay involved in doing so (Cleary v Australian Co-operative Foods Ltd (Nos 2 and 3) [1999] NSWSC 991; (1999) 32 ACSR 701, 719). …

197. The question of time and cost that his Honour raises goes to the second problem: that the reason why the documents, studies and analysis did not exist was because, as I understand it, the committee of management could not raise the funds to pay the consultants to prepare the reports, do the studies and undertake the analysis or take any significant step in respect of the development without a special resolution.  It is difficult to maintain that the committee did not take “reasonable steps” in the circumstances. In fact, they did take steps to obtain the necessary information to inform the project by removing this impediment: hence the attempt, successful as it turned out, to revise the constitution and enable the committee of management to progress the development with a simple majority of its members.

Orders

198. For these reasons, I make the following orders:

1. Order pursuant to section 1322(4)(a) of the Corporations Act 2001 (Cth), as applied by sections 96 and 97 of the Associations Incorporation Act 2009 (NSW) and regulation 18 of the Associations Incorporation Regulation 2016 (NSW):

1. that the conduct of the special general meeting of the first defendant held on 13 November 2018 (the November SGM) is not invalid by reason of any contravention of any provision of the Corporations Act, the Associations Incorporation Act or the Association’s constitution.

2. that the resolutions passed at the November SGM to amend the Association’s constitution and/or adopt a new constitution is not invalid by reason of any contravention of any provision of the Corporations Act, Associations Incorporation Act or the Association's constitution;

3. that the lodging of the amended constitution with the second defendant for registration is not invalid by reason of any contravention of a provision of the Corporations Act, Associations Incorporation Act or the Association's constitution; and

4. that the endorsement of persons to the office of Secretary and Treasurer of the Association at a meeting of the Committee of Management of the Association on 18 February 2019 are not invalid by reason of any contravention of a provision of the Corporations Act, Associations Incorporation Act or the Association’s constitution;

5. that any acts, matters or things purporting to have been done by the Association, or by persons acting on the Association’s behalf, in the period from 13 November 2018 to date are not invalid by reason of any contravention of a provision of the Corporations Act, Associations Incorporation Act or the Association’s constitution.

2. Dismiss the Amended Originating Process filed on 8 March 2019.

3. Order the plaintiffs to pay the defendants’ costs of the proceedings.

2. Discharge Order 1 made by Lindsay J on 25 January 2019 and release the first defendant from the undertaking noted in Order 2 on 25 January 2019.

3. Release the first defendant from the undertaking noted in Order 1(a) made by Rees J on 20 February 2019.

4. Grant liberty to the parties within 14 days to notify any correction or amendment sought to be made to these orders or any variation sought to Order 3.

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Amendments

04 October 2019 - Coversheet - Orders [198]

Decision last updated: 04 October 2019