Kabbara v Australian National Sports Club Incorporated

[2020] NSWSC 497

Supreme Court

New South Wales

Medium Neutral Citation:	Kabbara & Ors v Australian National Sports Club Incorporated [2020] NSWSC 497
Hearing dates:	2 April 2020
Date of orders:	01 May 2020
Decision date:	01 May 2020
Jurisdiction:	Equity
Before:	Rein J
Decision:	See [44]-[47].
Catchwords:	CONTRACTS – Implied terms – Terms implied in law – Where 18 (originally 19) plaintiffs sued a sporting club from which they had been purportedly expelled, alleging that the expulsions lacked a proper basis and were not in accordance with the club’s constitution (which operates as a contract between the members) – Separate determination of two questions, namely whether the constitution contained two implied terms, the first being the “expulsion term” (which states that members can only be expelled for the reasons identified in cl 22 of the constitution, which are the grounds for making a complaint about a member) and the “fairness term” (which states that members will not be expelled without first being afforded procedural fairness) – The plaintiffs advanced three alternative bases for implying the terms: from the express words of the contract, from the nature of the contract, and because the terms are necessary to give business efficacy to the contract – The club contended that neither term was implied in the constitution, that the club was free to expel members for any reason and that the club was not required to afford members procedural fairness in expelling them – Held: both the expulsion term and the fairness term are implied in the constitution. The first is implied on the basis of the combined effect of the express words of the contract (namely cl 11(c), which specifies the consequences of expulsion, and cl 22, which specifies the grounds for making a complaint about a member). The second is implied based on the “nature” of the contract, because the authorities on clubs indicate that, where an expulsion power exists, procedural fairness (or natural justice) will be implied unless it is excluded expressly or by necessary implication.   ASSOCIATIONS AND CLUBS – Domestic and private tribunals – Procedural fairness – Where the Court held that the constitution of a sporting club, which had purported to expel a number of its members, contained an implied term that members could not be expelled without first being afforded procedural fairness – Where the term was implied as a legal incident of the class of contract to which the club’s constitution belongs; the Court applied authority which holds that, where a club’s constitution contains an expulsion power, procedural fairness (or natural justice) will be implied unless it is excluded expressly or by necessary implication.
Legislation Cited:	Associations Incorporation Act 2009 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	ABC v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; (1977) 52 ALJR 20 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319 (Hodgson J, 11 June 1985, unreported) Carlton & United Breweries Ltd v Tooth & Co Ltd (1986) 7 IPR 581 Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 Dickason v Edwards [1910] HCA 7; (1910) 10 CLR 243 Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 Fowkes v Manchester and London Life Assurance and Loan Association (1863) 3 B&S 917 Goodwin v Vietnam Veterans Motor Cycle Club Australia NSW Chapter Inc [2008] NSWSC 154; (2008) 72 NSWLR 224 Hillas & Co Ltd v Arcos Ltd [1932] 43 Ll.L Rep 539; (1932) 147 LT 503 Hornby v Narrandera Ex-Servicemen’s Club Ltd [2001] NSWSC 235 Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 Luen Fook Tong Inc v Lowe [2011] NSWSC 1004 Marcus Clarke (Vic) Ltd v Brown [1928] HCA 12; (1928) 40 CLR 540 McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470; (2002) 191 ALR 759 Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 New South Wales Rifle Association Inc v Commonwealth [2012] NSWSC 818; (2012) 266 FLR 13 Raashed v Bangladesh Islamic Centre of New South Wales Inc [2018] NSWSC 1001 Rana v Survery [2012] NSWSC 439 Rose v Boxing NSW Inc [2007] NSWSC 20 Samuel v St George Leagues Club Ltd (NSWSC, 20 October 1992, Powell J, unreported) Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522
Texts Cited:	Nil
Category:	Procedural and other rulings
Parties:	Youcef Shaouki Kabbara (First Plaintiff) Natasha Hill (Second Plaintiff) Ilham Alameddine (Third Plaintiff) Nader Tabbaa (Fourth Plaintiff) Dawood Goddard (Fifth Plaintiff) Ahmed Faysal (Sixth Plaintiff) Taj Faysal (Seventh Plaintiff) Khaldoun Moussa (Eighth Plaintiff) Bassam Barake (Ninth Plaintiff) Khalid Majid Mousa (Tenth Plaintiff) Masen Abou-Zolof (Eleventh Plaintiff) Mohamed Charchouh (Twelfth Plaintiff) Talal Elcheikh (Thirteenth Plaintiff) Ibrahim Sukari (Fourteenth Plaintiff) Wissam Faysal (Sixteenth Plaintiff) Mohammad Kourouche (Seventeenth Plaintiff) Omar Chaar (Eighteenth Plaintiff) Rowah Hassan (Nineteenth Plaintiff) Australian National Sports Club Incorporated (Defendant)
Representation:	Counsel: Mr N. Furlan (Plaintiffs) Mr D. Stewart with Ms K. Hooper (Defendant)   Solicitors: Babington’s Lawyers (Plaintiffs) Williamson Barwick (Defendant)
File Number(s):	2018/250659
Publication restriction:	Nil

Judgment

1. The Defendant is an incorporated association known as Australian National Sports Club Incorporated (“the Club”). The 19 Plaintiffs were all members of the Club in 2017 and were informed that they had been expelled by the Club. The Plaintiffs claim that their expulsion had no proper basis. One of the Plaintiffs (Mr Belal Pickering, the Fifteenth Plaintiff) discontinued his proceeding against the Club in December 2019.

2. The hearing of the matter was originally fixed to commence on 31 March 2020. To reduce the length of the hearing, agreement was reached that the claims of wrongful expulsion for all Plaintiffs would be determined by the outcome in relation to three “test” members. The group of members that each of the three test members represents has been clearly defined and accepted. There are differences in the reasons for expulsion of each of the Plaintiffs given by the Club, but these differences are not presently significant, for reasons which will shortly become apparent.

3. As a result of the COVID-19 virus, from 24 March 2020 civil hearings have been subject to a directive of the Court that they are (save for limited exceptions) to be heard remotely by means of audio-visual link (“AVL”). At a directions hearing on Wednesday 25 March 2020, the limitations of the AVL system became apparent. A further directions hearing was held the following day at which various alternatives were discussed (and some of the problems apparent the day before were resolved). The parties through their legal advisors decided that the best way forward in the present circumstances was to have an issue (or issues) common to all Plaintiffs determined as a separate question pursuant, effectively, to rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW), a determination which involved no factual contest or cross examination of witnesses. This possibility had been canvassed by the Plaintiffs last year, but ultimately not pressed. I acceded to the request for a separate determination and also the parties’ request that the hearing of the separate question(s) commence on 2 April 2020 rather than on 31 March 2020 (the original start date for the hearing).

4. The separate questions for determination (“the Separate Questions”) are framed as follows:

1. Did the Constitution of the Defendant contain the term as pleaded at paragraph [29] of the Statement of Claim (‘Fairness Term’)?

2. Did the Constitution of the Defendant contain the term as pleaded at paragraph [28] of the Statement of Claim (‘Expulsion Term’)?

5. The Fairness Term set out at paragraph 29 of the Statement of Claim is as follows:

“It was an implied term of the Constitution that no General Member would be expelled from ANSC without first being afforded procedural fairness.”

6. The Expulsion Term set out at paragraph 28 of the Statement of Claim is as follows:

“It was an implied term of the Constitution that no General Member would be expelled from ANSC unless they had:

(a) persistently and wilfully acted in a manner prejudicial to the interests of ANSC; or

(b) persistently refused or neglected to comply with a provision of the Constitution.”

The grounds for expulsion expressed in the asserted Expulsion Term are identical to the grounds for making a complaint specified in cl 22.1 of the Constitution (the text of which is set out at [14] below).

7. At the commencement of the hearing, I raised with Mr N. Furlan of Counsel, who appears for the Plaintiffs, and Mr D. Stewart of Counsel, who appears with Ms K. Hooper for the Club, what would be the consequence of a conclusion that one or other of the Fairness Term or Expulsion Term is to be implied and what would be the consequence if neither term is implied. There is no dispute that if the Separate Questions are answered favourably to the Plaintiffs, the Court will need to fix a hearing for the determination of whether the Expulsion Term and the Fairness Term were breached by the Club. There will also be an additional issue of whether the power to expel was exercisable by the members of the Interim Caretaker Committee (“the ICC”) as opposed to the Management Committee (“the ICC Question”), and whether, as the Club contends, the Club was free to terminate the contract between the Club and the Plaintiffs at any time (“the Termination Question”). It was agreed that if the Separate Questions are determined adversely to the Plaintiffs then the Court would need to determine, at a future hearing, the ICC Question and the Termination Question, and also whether there is any power to expel members in the Constitution (see T7 - T12).

8. I received detailed and helpful written submissions from Counsel prior to the hearing (“the PWS” and “the DWS” respectively), and Counsel also addressed the issues at the hearing.

The Club

9. The Club is registered under the provisions of the Associations Incorporation Act 2009 (NSW) (“AIA”). The Club operates under a Constitution dated 27 November 2010 (“the Constitution”): see Exhibit A 232-265. By s 26 of the AIA, the Constitution binds its members as if it were a contract between them under which each member agrees to observe its provisions.

10. A Court Book was prepared for the full hearing, but for the Separate Questions only a small number of documents are relevant. This reduced bundle was marked Exhibit A, but the page numbering comes from the full Court Book.

11. Each of the test Plaintiffs joined the Club after November 2010.

12. There is no dispute between the Plaintiffs and the Club that the disputes between the Plaintiffs and the Club are justiciable and that the Court can grant declaratory relief of the type sought by the Plaintiffs in this matter: LuenFook Tong Inc v Lowe [2011] NSWSC 1004.

13. In May 2017 the Club commenced proceedings (2017/153989) against a number of individuals, including Mr Kabbara (the First Plaintiff), Mr Barake (the Ninth Plaintiff) and Mr Mousa (the Tenth Plaintiff), who are the three test Plaintiffs in the current proceedings. Mr Kabbara, Mr Mousa and Mr Barake were members of the Management Committee of the Club. The Club had purportedly dismissed them (and the other members of the Club’s Management Committee), and replaced the Management Committee with an “Interim Caretaker Committee of three Life Members” (i.e. the ICC, as previously defined). The Club sought declaratory relief that the Defendants in those earlier proceedings no longer constituted the Management Committee of the Club, but the Club discontinued its proceedings. Whilst it was agreed that in the present case the validity of the dissolution of the Management Committee is not an issue, the fact that the expulsion was by the ICC does have potential relevance to the outcome of the case (but not the determination of the Separate Questions), because the Plaintiffs contend that the power to expel was given to the Management Committee not the ICC.

The Constitution

14. The following provisions of the Constitution (with emphasis added by me) are relevant to the issues raised by the Separate Questions:

“4.0 Objects

The objects of the Club are:

(a) To foster and develop soccer, rugby league, rugby union and other sports as its main purpose.

(b) To train coaches and referees among youth and adult players alike in various football codes to meet best practice.

(c) To discourage the use of intoxicants, narcotics, performance enhancing drugs and other noxious drugs.

(d) To discourage gambling and betting.

(e) To encourage the development of good character and discipline.

(f) To organise multi ethnic and Australian colonial events that encourage unity and friendship in the community.

(g) To promote, organise and encourage healthy indoor and outdoor sporting and exercise groups for children and young persons under 18 years, women, men and the aged.

(h) To provide sporting and other services that strengthens the bonds between members of all categories within the Club, and between the families and associates of members of the Club.

(i) To build, construct and establish, alter, rebuild, renovate construct and maintain building and grounds, premises, rooms and other facilities for the purpose of carrying out the above objectives.

(j) To operate a not for profit organisation which may register with the Charities Department for fundraising purposes only.

(k) To seek and obtain gift tax status through the category best related to Sporting and Educational Development and Research.

(l) To seek lawfully obtained funds from Australian and overseas authorities and benefactors dedicated to sporting development, and to invest such funds in real estate acquisitions or other similar solid investments.

(m) To invite overseas players to Australia and to visit overseas venues with Australian players in annual exchange programmes.

(n) To share expertise in Club management, team training, refereeing, paramedical, fundraising and any other sporting related expertise in all sporting codes both within Australia and overseas.

(o) To prepare and materially support players to qualify for District, State, National, Commonwealth, International and Olympic standard sporting events.

8.0 General Membership

General Membership shall consist of players, parents of players or any other interested person who has attained the age of eighteen years.

9.0 Nomination of General Members

9.1 To be nominated as a General Member the person must:

(a) be a natural person;

(b) be an Australia Citizen;

(c) be nominated by two General Members or Life Members or a combination thereof;

(d) complete the Application for Membership Form as set out in Appendix 1 to this Constitution;

(e) submit the Application to the Secretary of the Club; and

(f) enclose the appropriate membership fee.

9.2 After receiving a nomination for General membership, the Secretary must, as soon as practicable, refer the nomination to the Management Committee which is to determine whether to approve or to reject the nomination.

9.3 The Management Committee must send its determination in writing to the Board of Life Members.

10.0 Rights of General Members

A General Member may:

(a) Vote at any Annual General Meeting or Special General Meeting;

(b) Nominate for candidature in an election of the Management Committee;

(c) Move, second and/or speak to any motion, proposal or question before any Annual General or Special General Meeting of the Club; and

(d) Make representations orally or in writing at any meeting in which their General Membership is under consideration.

11.0 Cessation of General Membership

A person ceases to be a General Member of the Club if the person:

(a) dies; or

(b) resigns membership in writing; or

(c) is expelled from the Club;

(d) is or has been declared bankrupt; or

(e) has been convicted of criminal charge anywhere in Australia; or

(f) becomes a non-financial member by virtue of not paying annual membership fee within 28 days of a written request by Secretary; or

(g) provides false information or makes a false declaration on their application for General membership; or

(h) ceases to be a citizen of Australia.

12.0 Life Membership

Life Members shall be persons who have founded the Club, or whose contribution to the Club is much esteemed, or who are General Members who have been nominated to the College of Life Members and have been accepted by the Board of Life Members to become one of the Life Members in the College of Life Members. Once accepted, the position of Life Member requires full participation in the governing of the Club’s activities.

22.0 Disciplining of General Members

22.1 A complaint may be made by any General Member or Life Member of the Club that a General Member of the Club:

(a) has persistently refused or neglected to comply with a provision or

provisions of these rules; or

(b) has persistently and wilfully acted in a manner prejudicial to the interests of the Club.

22.2 On receiving such a complaint the Management Committee shall deal with the complaint in accordance with the current Policy and Procedures Manual.”

15. The only express reference to expulsion in the Constitution is found in cl 11(c), which provides that a person ceases to be a General Member of the Club if that person is expelled from the Club. Clause 22, although it deals with disciplining of members, does not itself refer to expulsion.

16. It will be observed that cl 22 makes reference to a current “Policy and Procedures Manual” (“PPM”). The Club has in correspondence asserted that there is no PPM (see CB 508-510), and Mr Stewart has made a similar assertion from the Bar table. There is no evidence from the Club that no PPM was ever created or promulgated, or that if one was created and promulgated, that it was withdrawn.

17. Noting the absence of any express wording in the Constitution referring to the power of expulsion or the terms on which expulsion can be effected, the Plaintiffs say that “the only power of expulsion that is in this constitution, is one that is [conditional] upon the two terms pleaded”, being the Fairness Term and the Expulsion Term, and that if the Court finds that neither term forms part of the Constitution, then the Plaintiffs’ position is that “the power to expel is not in the Constitution”: see T6.40 - T7.11. The Club’s position is that neither the Expulsion Term nor the Fairness Term are to be implied, and that the Club has an unfettered power to expel. The Club also contends that it has the right to terminate membership at its complete discretion, subject only to possibly a requirement for reasonable notice to be given (the Termination Question, as previously defined above). This later argument (which it is agreed is not for determination as part of the Separate Questions) relies on the fact that there is a contract between the Club and its members and asserts that, like most contracts which are not for a specified period, the Plaintiffs’ contracts with the Club are terminable at will: see, for example, Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438.

The Expulsion Term

18. I shall deal first with the Expulsion Term since, logically, the basis for expulsion, or possible expulsion, needs to be identified before any issue of fairness arises.

18. The Plaintiffs contend that the Expulsion Term is to be implied on three alternative bases (which I will refer to as “limbs” of the Plaintiffs’ argument):

1. From the express words of the Constitution (“first limb”).

2. From the nature of the Contract, i.e. as a legal incident of the class of contract to which the Constitution belongs (“second limb”).

3. To give the Constitution an effective operation (“third limb”).

20. In support of the contention that the Expulsion Term is to be implied from the express words of cls 11 and 22, Mr Furlan relies on the following matters:

1. Clause 11 provides that membership can be lost for several reasons other than expulsion, some of which do not require any further expansion, i.e. conviction in Australia of a criminal offence is complete in itself. Clause 11(c) does not make any attempt to deal with reasons for expulsion – it assumes that there is, from some other source, a power of expulsion, and gives no hint or suggestion of what those reasons might be.

2. Clause 22, whilst not referring to “expulsion”, enumerates two possible bases for complaint and consequential disciplinary action. Expulsion can be described as a disciplinary result and, indeed, a final form of disciplinary action for a member of a club.

3. If the two (and only two) reasons for disciplinary action are those specified in cl 22, there is no uncertainty as to the grounds for expulsion. The two matters mentioned are matters of significant import and seriousness, and every new member is immediately aware from reading cl 22 of conduct which may have disciplinary consequences.

21. The Club, through the DWS, submits that:

1. The Constitution is “entirely effective in its operation without the Expulsion Term” (DWS 1.26).

2. The Expulsion Term is not so obvious that it goes without saying.

3. The Expulsion Term is not capable of clear expression and the Plaintiffs are seeking to “add conditions to the exercise of that (otherwise) clearly stated power”, and by seeking to merge cls 11 and 22 they are, in effect, “redrafting the Constitution”.

4. Clause 22 does not refer to “expulsion” of General Members and the DWS contend that in the absence of a PPM “if cl 22 is read as imposing a restriction or precondition on the power to expel there is no power in the Defendant to expel a General Member at all.” Courts should be astute to adopt a construction which will preserve the validity of a contract: Hillas & Co Ltd v Arcos Ltd [1932] 43 Ll.L Rep 539; (1932) 147 LT 503; Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 at 589 per Mason J (as His Honour then was).

5. Nothing in the authorities on incorporated associations supports the proposition that terms in the nature of the Expulsion Term are implied as a matter of law into the constitutions of incorporated associations.

22. It should be noted that [21](1), (2) and (3) above are really dealing with the third limb of the Plaintiffs’ argument and [21](5) above is dealing with the second.

23. The DWS erroneously treat the Plaintiffs as accepting that there is a power to expel simpliciter found in the Constitution, whereas the Plaintiffs’ position is that the only way in which a power to expel can be discerned is by reading cls 11(c) and 22 together. Thus, cl 11(c), whilst premised on there being a power to expel in the Constitution, does not itself confer any power to expel or provide any indication as to the bases of disciplinary action but, rather, deals with the consequences of expulsion, and cl 22 provides the bases for disciplinary action.

24. The three alternative limbs on which the Plaintiffs put their case find expression (as three of four categories) in the decision of Hodgson J (as His Honour then was) in Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319 (Hodgson J, 11 June 1985, unreported). This categorisation was referred to and adopted by Young J (as His Honour then was) in Carlton & United Breweries Ltd v Tooth & Co Ltd (1986) 7 IPR 581 at 605-606, and again referred to with approval by Heydon JA in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [28]-[31], and see also New South Wales Rifle Association Inc v Commonwealth [2012] NSWSC 818; (2012) 266 FLR 13 at [115] and [126]-[127] per White J (as His Honour then was). The passage from Hodgson J’s judgment, as quoted in Carlton (Young J) and Brambles, is as follows:

“There is a spectrum of different types of implied terms covering, inter alia, the following:

(i) Implications contained in the express words of the contract: see Marcus Clarke (Vic) Ltd v Brown (1928) 40 CLR 540 at 553–4.

(ii) Implications from the “nature of the contract itself” as expressed in the words of the contract: see Liverpool City Council v Irwin [1977] AC 239.

(iii) Implications from usage (for example, mercantile contracts).

(iv) Implications from considerations of business efficacy: see BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.”

It can be seen that the three limbs of the Plaintiffs’ argument correspond to categories one, two and four in the passage from Carlton (Hodgson J).

25. In Carlton (Hodgson J), Hodgson J makes reference to the judgment of Higgins J in Marcus Clarke (Vic) Ltd v Brown [1928] HCA 12; (1928) 40 CLR 540 at 553-554, in which Higgins J accepted that a term can be implied from the express words used in a contract, although His Honour, in dissent, was of the view that the principle was not applicable to the case at hand.

26. There is no doubt that the Courts have accepted that this category exists, but I think it is not only the judgment of Higgins J which lends support but also the majority’s decision (Knox CJ, Isaacs and Powers JJ). The case concerned a hire purchase agreement entered into by Mr Brown with the Appellant (“the seller”) in respect of a motor car. Brown’s case was that he had bought (through hire purchase) a new car, but what was sold to the financier and hired to him was a used car. None of the documents issued expressly described the car as new, but the order form contained a statement that all new cars were sold subject to a guarantee and that second-hand cars were not. The hire purchase agreement which Brown signed repeated the reference to the guarantee and also stated that the agreement excluded any implied “warranty undertaking or agreement other than is herein set forth”. The seller sued Brown for rental and Brown cross claimed seeking, in effect, rescission of the agreement and claiming that the seller had misrepresented the vehicle as new. The Victorian County Court found in Brown’s favour and the Victorian Court of Appeal rejected the seller’s appeal. The majority in the High Court rejected the appeal. In addition to Higgins J, Starke J dissented.

27. Higgins J was of the view that the statement that “no guarantee is given with second hand cars” was not convertible into a statement that the car sold is new and he expressed the view that no implication that the car is new should be adopted unless it is necessary or unavoidable. Starke J agreed with Higgins J that there should be a new trial holding that:

“the guarantee contained in the documents attaches to the car sold, whatever its description may be, and in no way defines or describes the car the subject matter of the sale.”

28. The majority applied the principle in Fowkes v Manchester and London Life Assurance and Loan Association (1863) 3 B&S 917 at 929 per Blackburn J, that in all deeds and instruments the language used by one party is to be construed in the sense in which it would be reasonably understood by the other party. Since paragraph 11 of the terms said that all new cars were sold subject to a guarantee, paragraph 13 said that no guarantee was given with second-hand cars, and Brown was provided with a guarantee:

“he would naturally believe it was given in pursuance of the 11th paragraph of ‘A’. There is no doubt Brown did so believe. The just and true construction of the contract – that is, of its actual words – is that it asserts the car to be ‘new’.”

29. Thus, in Marcus Clarke, the term that the car was a new car was implied from the combined effect of two documents, neither of which itself contained the term. In the present case there are not two documents but one – the Constitution. One clause (cl 11(c)) envisages that General Members can be expelled and another clause (cl 22) gives a basis for disciplinary action. If cl 22 does not define the reasons available for expulsion, then no clause does. I will deal with the issue of the PPM in relation to the Fairness Term, but on the face of cl 22 there is nothing to indicate that the PPM would provide the reasons for expulsion.

30. The Expulsion Term gives the Constitution a clear, “congruent” and internally consistent operation (see Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 at [16] per Gleeson CJ, McHugh, Gummow and Kirby JJ), whereas the construction advanced by the Club would permit expulsion for reasons that are not known to or made clear to members at the time of joining or, indeed, at any time, which would, as Mr Furlan submitted, produce a plainly unreasonable and unjust result, a relevant consideration: see, for example, Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35], and also see ABC v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109-110 per Gibbs J (as His Honour then was), in which His Honour explains that the principle is not limited to commercial contracts.

31. I think it is the Plaintiffs’ proposed construction of the Constitution that prevents the Constitution from having no real content for grounds of expulsion, and I agree that it is most unlikely that it was intended that the Club could expel a member on any basis whatsoever without members being informed of what the basis might be. I should also note that in the context of terms implied by reason of express words used (i.e. Hodgson J’s first category), as here, issues of the type that arise in Hodgson J’s fourth category (as in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; (1977) 52 ALJR 20, and see also Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 442 per McHugh and Gummow JJ, and Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 at [113] per Gageler J) are not relevant in relation to the first category: see Brambles at [30].

32. In view of my conclusion in relation to the first limb of the Plaintiffs’ argument, I do not think it is necessary to consider the second and third limbs advanced in the PWS.

The Fairness Term

33. In contending that the Fairness Term exists, the Plaintiffs rely on the same three limbs as they do for the Expulsion Term, which (as noted previously) correspond with categories one, two and four in the passage from Carlton (Hodgson J) set out at [24] above. In relation to the first limb (an implication by construction from the express words of the contract), the words in the contract on which the Plaintiffs rely are:

1. Clause 10(d), which provides that a General Member may make “representations” orally or in writing at any meeting in which their General Membership is under consideration.

2. Clause 11(c).

3. Clause 22. The Plaintiffs point out that cl 22 has six requirements, each one of which must be strictly complied with (see Goodwin v Vietnam Veterans Motor Cycle Club Australia NSW Chapter Inc [2008] NSWSC 154; (2008) 72 NSWLR 224 and Rana v Survery [2012] NSWSC 439):

1. A complaint must be made to the Management Committee.

2. The complaint must be made by a member (i.e. General Member or Life Member).

3. The subject matter of the complaint must fall into one of the two categories.

4. The complaint must be received by the Management Committee.

5. The Management Committee must deal with the complaint.

6. The Management Committee must deal with the complaint in accordance with the PPM.

34. Whilst there is much to be said for this contention, I think the position in relation to the second limb is very clear, and so I will not deal further with the first limb.

35. In relation to the second limb – implication in law from the nature of the contract – the Plaintiffs rely on the following authorities: Dickason v Edwards [1910] HCA 7; (1910) 10 CLR 243 at 255 in which O’Connor J said:

“In interpreting rules conferring jurisdiction to any tribunal, there is always to be read into them the underlying condition that the proceedings shall be carried on in accordance with the fundamental principles of natural justice. It is upon a party who wishes to shut out the implication of that basic condition to show that the rules expressly or by necessary implication negative the implication of its existence.”

and Rose v Boxing NSW Inc [2007] NSWSC 20 in which Brereton J (as His Honour then was) said at [105]:

“The juristic basis upon which the principles of natural justice apply to the proceedings of a domestic tribunal which has no statutory basis is to be found in contract; in the absence of express provision to the contrary, it is implied in disciplinary provisions of the rules of such associations that they will be exercised in accordance with the rules of natural justice [Trivett v Nivison [1976] 1 NSWLR 312, 317-319]. Thus, natural justice comes to operate in private clubs and associations by the interpretation of their rules on the basis that fair procedures are intended, while recognising the possibility that express words or necessary implication in the rules could exclude natural justice in whole or part [Dickason v Edwards [1910] HCA 7 ; (1910) 10 CLR 243 at 250, 255; Australian Workers' Union v Bowen (No 2) [1948] HCA 35; (1948) 77 CLR 601, 617, 631; McClelland v Burning Palms Surf Life Saving Club]. Accordingly, their source is contractual, even where the relevant constitution makes no express provision, and their contravention in such a case is a breach of contract.”

36. The Club resists the contention that the Fairness Term should be implied on the following grounds:

1. A term will not be implied unless the contract is commercially ineffective without it: BP Refinery at 292 and Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 346, Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 at 66, 118 and 139. The Constitution is not ineffective without the Fairness Term.

2. The fact that a contract would be more onerous or harsh without the Fairness Term is not a reason to justify its implication.

3. The term must be so obvious it goes without saying.

4. It must be capable of clear expression: Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54 at 62 per Gibbs J (as His Honour then was). The Plaintiffs have not pleaded the content of the Fairness Term, and a term of “fairness” is not one amenable to clear expression, rather, “it is inherently imprecise” (DWS 1.18).

5. Where there is a variety of conflicting terms that might be equally plausible, none will be sufficiently obvious to be implied: Codelfa at 355-356.

6. The Constitution refers to a PPM, so:

“The parties did consider the incorporation into their agreement of terms governing disciplinary procedures. They determined that this would be done by reference to a “Policy and Procedures Manual”. This did not eventuate. However, that does not, with respect, permit the Court to essentially write contractual terms governing expulsion of the Plaintiffs”: DWS 1.20.

DWS 1.25 states that whilst apparently the objective intention of the parties at the time they entered into contractual relations was that:

“there may or would be a Policy and Procedures Manual which set out, inter alia, a procedure to be followed by a Management Committee in dealing with a complaint received under cl 22.0 of the Constitution. That the parties’ common intention was not realised is not a licence for the plaintiffs to now ask the Court to write in terms of the Constitution so as to reflect what the plaintiffs regard as a fair procedure for dealing with disciplinary issues; let alone expulsion.”

37. It will be observed that the Club relies on the reference to the PPM as a reason to rebut the Fairness Term. I agree that the parties to the Contract must have envisaged that there would be a PPM. If there was a PPM, then consideration could be given as to whether its terms are consistent or inconsistent with the requirement for procedural fairness. The Club’s failure to produce a PPM without evidence from it that there is no such document creates an anomaly. If there is no such PPM then, strictly, it might be said that no one can be disciplined under cl 22 because the terms of the Constitution must be followed precisely (see [39] below), and if no one can be disciplined then perhaps there is no power to expel – but this issue does not form part of the Separate Questions. There is nothing in the Constitution which contradicts or ousts the requirement for fairness. I accept that on current authority a PPM might have that effect, but no PPM has been put forward (and the Club says that is because there is none) so it cannot be accepted that the non-existent PPM “expressly or by necessary implication” negatives the implication of the Fairness Term. I accept the Plaintiffs' contention that if the Expulsion Term exists (as I have found it does) then, unless expressly or by necessary implication excluded, the Fairness Term exists as well, and the Club has failed to demonstrate that the requirement for fairness has been excluded expressly or by necessary implication.

38. This is reinforced, in my view, by the terms of cl 22 which envisage a procedure in disciplinary matters: see [33](3) above. The Plaintiffs also rely on the requirement for payment of annual membership fees and cl 10(d) which requires a member to be given an opportunity to be heard (orally or in writing) at any meeting in which “their General Membership is under consideration”. I would add that not only does 10(d) point to recognition of a requirement of fairness but it also rather suggests that whatever procedure was intended to exist under the PPM involved consideration of expulsion by the Club’s members, not simply the Management Committee – perhaps following a resolution of the Management Committee. An example of that kind of provision can be seen in Goodwin (supra) at [7] and another example is found in McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470; (2002) 191 ALR 759 per Campbell J (as His Honour then was) at [72]. Again, this is not a matter that falls within the Separate Questions.

39. In Samuel v St George Leagues Club Ltd (NSWSC, 20 October 1992, Powell J, unreported), Powell J (as His Honour then was) set out the principles of law applicable to clubs, a passage cited in full and followed in Hornby v Narrandera Ex-Servicemen’s Club Ltd [2001] NSWSC 235 per Hamilton J at [8] (and see McClelland at [74]):

“I proceed upon the basis that the principles of law which are relevant to a case such as the present are as follows:

1. A club, such as the Defendant, may not suspend, or expel, a member unless a power to do so is contained in what might be called its ‘constituent statute’.

2. Unless a deviation therefrom is sought, or assented to, by the member to be affected, the power to suspend, or expel, if it is to be validly exercised, must be exercised strictly in accordance with the procedures laid down in the club's ‘constituent statute’.

3. Since the rights of a member of a club such as the Defendant are proprietary in nature, then, unless the ‘constituent statute’ expressly, or by necessary implication, provides to the contrary, the power to suspend, or expel, must be exercised in accordance with ‘the rules of natural justice’.

4. Although the ‘rules of natural justice’ to be applied in any particular case depend upon the circumstances (see for example Russell v Duke of Norfolk [1949] 1 AER 109 at 118) what is required for the valid exercise of a quasi-judicial function, such as the exercise of a power to suspend, or expel, is judicial fairness (see Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation (1963) 113 CLR 475 at 504).

4.[sic] In my view, the minimum requirements of judicial fairness are that:

(a) the accused person be fairly apprised of what is alleged against him (see Hall v NSW Trotting Club (1971) NSWLR 378; Calvin v Carr (1977) 2 NSWLR 308;

(b) the accused person must have a fair opportunity to bring forward material to correct or to controvert any allegation made against him;

(c) the accused person is entitled to have the tribunal before which he appears consider, evaluate and form an opinion on, what is put on each side in an honest and unbiased way and unaffected by any ulterior, or extraneous motive (see for example Barnes v Oliver (1970) 16 FLR 366; Stollery v The Greyhound Racing Control Board (1972) 128 CLR 509; Dale v New South Wales Trotting Club (1978) 1 NSWLR 551).

6. Depending upon the nature of the charge, and the potential consequences to the accused of an adverse finding, the accused may also be entitled:

(a) to be given detailed particulars of matter with which he has been charged;

(b) to be given, in advance of any hearing of the charge, a statement of ‘evidence’ to be tendered to support the charge;

(c) to have the assistance of competent legal representation (see Petty Greyhound Race Association (1969) 1 QB 125; (1970) 1 QB 46; Enderby Town Football Club Ltd v Football Association (1971) Ch 591; McNab v Auburn Soccer Sports Club Ltd (1975) 1 NSWLR 547.

7. An accused person's right to an unbiased tribunal entitles him:

(a) except in cases of necessity’, to have those who act as prosecutors not take part [in] the deliberations of the Tribunal (see Dickason v Edwards (1910) 10 CLR 243; Australian Workers Union v Bowen (No 2) (supra)); and

(b) to have strangers excluded from taking part in the tribunal deliberations (see Macsween v Fraser (1956) 1 FLR 10; Steuart v Oliver (No 1) (1971) 19 FLR 99; Ethell v Whalan (1971) 1 NSWLR 416).”

40. In McClelland, Campbell J noted at [82] in relation to private clubs that:

“…it has likewise long been recognised that rules of natural justice apply to the exercise of a power of expulsion…”

and after discussion of a number of cases His Honour said:

[97] In Australia, the preferable view is that natural justice comes to operate in private clubs and associations by the rules of those private organisations being construed on the basis that fair procedures are intended, but recognising the possibility that express words or necessary implication in the rules could exclude natural justice in whole or part. The judgments in Dickason v Edwards support that view. Further, in Australian Workers’ Union v Bowen (No.2) (1948) 77 CLR 601 the statement of O’Connor J in Dickason v Edwards to that effect (set out in paragraph 84 above) was approved by Latham CJ at 617, and also by Dixon J (with whom Starke J agreed) at 631. Williams J, at 638 said:

“But the principles of natural justice cannot override the express provisions of the rules, and it could not be “contrary to the essence of justice” for the executive council honestly and bona fide to exercise all its powers and duties under the rules.”

[98] To some extent the rules of natural justice are applied to the rules as a matter of construction of terms within them (so that a reference to a “hearing” will be construed as a reference to a fair hearing, and a reference to “after inquiry” will be construed as a reference to “after due inquiry”, unless there is a context which shows that that construction was not intended), and to some extent the rules of natural justice are applied to the rules of the private organisation by a process of implication of terms, when there is no express term inconsistent with the implication of such a term.”

: see, also, Raashed v Bangladesh Islamic Centre of New South WalesInc [2018] NSWSC 1001 at [132]-[137] per Sackar J.

41. The other points made in the DWS set out at [36](1)-(4) are points relevant to the third limb of the Plaintiff’s argument (i.e. the fourth category identified in Carlton (Hodgson J) and enumerated in the BP Refinery case), but they do not apply to the second (or first) limb of the Plaintiff’s argument.

42. Samuel, Hornby and McClelland all make clear that expulsion (or suspension) must be exercised in accordance with the rules of natural justice (unless the rules are excluded expressly or by necessary implication) and that those rules are capable of ascertainment. Contrary to the suggestion in the DWS that a requirement of procedural fairness is “inherently imprecise”, Samuel enunciates a minimum content for the rules of natural justice in the context of clubs, which I take to be synonymous with “procedural fairness”.

43. I do not accept the Club’s contention that the rules of natural justice are only to be implied where there is some procedure specified, such as a “hearing”. The first principle enunciated by Powell J in Samuel is that a club has no power to suspend or expel unless the power is contained in its constitution, and the third principle is that the rules of natural justice must be applied unless the rules are excluded expressly or by necessary implication. Neither Samuel nor the passages from Rose and Dickason set out at [35] above, nor the passages from McClelland set out at [40] above, contain the qualification the Club contends for. The requirement that the member subject to possible expulsion be given, for example, the right to be heard on that issue is part of the natural justice requirement – it is not dependant on there being a reference to a hearing in the Constitution and it can be applied to the Expulsion Term, which I have found exists in the Constitution as an implied term. There is just as much, if not more, reason to imply the Fairness Term where no reference is made to a hearing than where a hearing of some kind is specified. There is nothing in the Constitution which contradicts, or is inconsistent with, the implication of the requirements of procedural fairness in exercising a power to expel. Indeed, a number of the Constitution’s terms, such as cls 10(d) and 22, clearly support the implication of the basic requirements of natural justice as elaborated by Powell J in Samuel set out at [39] above.

44. It follows that, in my view, the Constitution contains the Expulsion Term and the Fairness Term.

45. I therefore answer the Separate Questions:

1. Yes.

2. Yes.

46. The Club should pay the Plaintiffs’ costs of the Separate Questions.

47. The matter should be listed before the Equity Registrar to obtain a hearing date for the balance of the proceedings.

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Decision last updated: 06 May 2020