Kopilovic v Gatley
[2005] WASC 62
KOPILOVIC & ORS -v- GATLEY & ORS [2005] WASC 62
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 62 | |
| Case No: | CIV:1593/2003 | 15-17 MARCH 2004 | |
| Coram: | EM HEENAN J | 22/04/05 | |
| 38 | Judgment Part: | 1 of 1 | |
| Result: | Declaration that Constitution of April 2000 was effectively adopted by a special resolution validly passed at a general meeting of members | ||
| B | |||
| PDF Version |
| Parties: | PATRICIA LILANA KOPILOVIC JOHN GIARDINA DAMIEN CIRANNA JOHN ANTONACCI MARCIA FRAGIADAKIS VIVIAN SIMPSON AARON-LEE WILDE DEE JAMES DEBRA OFFER ANNE FARRAWELL NATHAN MAJOR HELEN MAJOR RAYMOND BUCKLEY SNEDDON CARMELO FRANCESCO RACCUIA DEREK FRANCIS GATLEY MARGARET ANN LONSDALE VINCENT RAYMOND BAIN JEFFREY ROBERT ELWORTHY CAROL KAY KIMMINS KATHRYN FRANCES WIGGINS TONY JOSEPH TILENNI ROBERT HENRY COURTS ROBERT JOHN STEELE MALCOLM LENNARD BATTY VINCENT SILVIO IOPPOLO EAMON MICHAEL McGRATH PETER SPENCER SMITH ORYST TKACZ DALLAS LESLIE WILLIAMS LEE GARTH WILTON DANCESPORT AUSTRALIA LTD (ACN 085 929 835) |
Catchwords: | Corporations Company limited by guarantee Alteration of constitution Membership Whether applicants for membership became members on payment of application and guarantee moneys Associated unincorporated association Transmission of moneys from unincorporated association to corporation Continuation of affairs of unincorporated association while moneys held by corporation Refusal to register applicants for membership corporation until after change in constitution Identification of members of corporation entitled to vote on special resolution to alter constitution |
Legislation: | Corporations Act (Cth) Corporations Law |
Case References: | Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 Bothranch Pty Ltd v Monitronix Ltd (1999) 15 ACLC 35 Cotter v National Union of Seamen [1929] 2 Ch 58 Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation (1952) 86 CLR 335 Edwards v Halliwell [1950] 2 All ER 1064 Federal Commissioner of Taxation v Angus (1961) 105 CLR 489 Federal Commissioner of Taxation v Patcorp Investments Ltd (1976) 140 CLR 247 Foss v Harbottle (1843) 2 Hare 461; 67 ER 189 Harben v Phillips (1883) 23 Ch D 14 Jalmoon Pty Ltd (In Liq) v Bow [1997] 2 Qd R 62 Kingston v Keprose Pty Ltd (No 3) (1987) 11 NSWLR 404 Millar & Ors v Houghton Table Tennis & Sports Club Inc [2003] SASC 1 NSW Henry George Foundation v Booth (2002) 54 NSWLR 433 Oatmont Pty Ltd v Australian Agricultural Co Ltd (1991) 5 ACSR 75 Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1996) 20 ACSR 553 Re Renown Rubber Ltd [1933] St R Qd 324 Solicitor-General v Wylde (1945) 46 SR (NSW) 83 Spitzel v Chinese Corporation Ltd (1899) 80 LT 347 Stevens v Keogh (1946) 72 CLR 1 Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 Aloridge Pty Ltd (provisional Liquidator appointed) v WA Gem Explorers Pty Ltd (In Liq) (1996) 22 ACSR 484 Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399; 132 ALR 1; 69 ALJR 890; 13 ACLC 1,698 Brian v Judo Federation of Australia (Qld) Ltd (1994) 15 ACSR 708 Carlton Cricket & Football Social Club v Joseph [1970] VR 487 Commissioner for Corporate Affairs v Sansom [1981] WAR 32 Farmers' Mercantile Union & Chaff Mills Ltd v Coade (1921) 30 CLR 113 Howard v Mechtler (1999) 30 ACSR 434 Jones v Money Mining NL (1995) 17 ACSR 531 K T & T Developments Pty Ltd v Tay (1995) 13 WAR 363 Keightly, Maxstead & Co v Durant [1901] AC 240 Lorenzi v Lorenzi Holdings Pty Ltd (1993) 12 ACSR 398 Malthouse v Adelaide Milk Supply co-operative Ltd [1922] SASR 572 Minsoul Pty Ltd v Federal Commissioner of Taxation (1974) 48 ALJR 283 Norths Ltd v McCaughan Dyson Capel Cure Ltd (1988) 12 ACLR 739 Numin Holdings' Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74 Nyulasy v Rowan (1891) 17 VCR 663 Pender v Lushington (1877) 6 Ch D 70; 46 LJ Ch 317 Precision Data Holdings Ltd v Titan Hills Australia Ltd (1990) 2 ACSR 707; 9 ACLC 151 Rayfield v Hands [1958] 2 All ER 194; [1960] Ch 1 Re Clifton Springs Hotel Ltd [1939] VLR 27 Re Compaction Systems Pty Ltd [1976] 2 NSWLR 447; (1976) 2 ACLR 135 Re F H Ring & Co Ltd [1924] SASR 138 Re Gambrinus Lager Beer Brewery Co Ltd (1886) 12 VLR 446 Re Independent Quarries Pty Ltd (1994) 12 ACLC 159 Re Queensland Petroleum Management Ltd [1989] 1 Qd R 549 Re Spargos Mining NL (1990) 3 ACSR 1 Registrar-General v Northside Developments Pty Ltd (1989) 14 NSWLR 571 Specialty Press Ltd v Industrial Equity Ltd (1977-1978) CLC 40-339; FCt SCt of Vic Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722; 10 ACSR 699; 11 ACLC 629 Sung Li Holdings Ltd v Medicom Finance Pty Ltd (1995) 13 ACLC 955 Watson v J & A G Johnson Ltd (1936) 55 CLR 63 White-Gourley & Anor v Goonan & Ors (1935) 37 WALR 99 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
JOHN GIARDINA
Second Plaintiff
DAMIEN CIRANNA
Third Plaintiff
JOHN ANTONACCI
Fourth Plaintiff
MARCIA FRAGIADAKIS
Fifth Plaintiff
VIVIAN SIMPSON
Sixth Plaintiff
AARON-LEE WILDE
Seventh Plaintiff
DEE JAMES
Eighth Plaintiff
(Page 2)
- DEBRA OFFER
Ninth Plaintiff
ANNE FARRAWELL
Tenth Plaintiff
NATHAN MAJOR
Eleventh Plaintiff
HELEN MAJOR
Twelfth Plaintiff
RAYMOND BUCKLEY SNEDDON
Thirteenth Plaintiff
CARMELO FRANCESCO RACCUIA
Fourteenth Plaintiff
AND
DEREK FRANCIS GATLEY
First Defendant
MARGARET ANN LONSDALE
Second Defendant
VINCENT RAYMOND BAIN
Third Defendant
JEFFREY ROBERT ELWORTHY
Fourth Defendant
CAROL KAY KIMMINS
Fifth Defendant
KATHRYN FRANCES WIGGINS
Sixth Defendant
TONY JOSEPH TILENNI
Seventh Defendant
(Page 3)
- ROBERT HENRY COURTS
Eighth Defendant
ROBERT JOHN STEELE
Ninth Defendant
MALCOLM LENNARD BATTY
Tenth Defendant
VINCENT SILVIO IOPPOLO
Eleventh Defendant
EAMON MICHAEL McGRATH
Twelfth Defendant
PETER SPENCER SMITH
Thirteenth Defendant
ORYST TKACZ
Fourteenth Defendant
DALLAS LESLIE WILLIAMS
Fifteenth Defendant
LEE GARTH WILTON
Sixteenth Defendant
DANCESPORT AUSTRALIA LTD (ACN 085 929 835)
Seventeenth Defendant
Catchwords:
Corporations - Company limited by guarantee - Alteration of constitution - Membership - Whether applicants for membership became members on payment of application and guarantee moneys - Associated unincorporated association - Transmission of moneys from unincorporated association to corporation - Continuation of affairs of unincorporated association while moneys held by corporation - Refusal to register applicants for membership
(Page 4)
corporation until after change in constitution - Identification of members of corporation entitled to vote on special resolution to alter constitution
Legislation:
Corporations Act (Cth)
Corporations Law
Result:
Declaration that Constitution of April 2000 was effectively adopted by a special resolution validly passed at a general meeting of members
Category: B
Representation:
Counsel:
First Plaintiff : Mr K G Robson & Mr C J Hewitt
Second Plaintiff : Mr K G Robson & Mr C J Hewitt
Third Plaintiff : Mr K G Robson & Mr C J Hewitt
Fourth Plaintiff : Mr K G Robson & Mr C J Hewitt
Fifth Plaintiff : Mr K G Robson & Mr C J Hewitt
Sixth Plaintiff : Mr K G Robson & Mr C J Hewitt
Seventh Plaintiff : Mr K G Robson & Mr C J Hewitt
Eighth Plaintiff : Mr K G Robson & Mr C J Hewitt
Ninth Plaintiff : Mr K G Robson & Mr C J Hewitt
Tenth Plaintiff : Mr K G Robson & Mr C J Hewitt
Eleventh Plaintiff : Mr K G Robson & Mr C J Hewitt
Twelfth Plaintiff : Mr K G Robson & Mr C J Hewitt
Thirteenth Plaintiff : Mr K G Robson & Mr C J Hewitt
Fourteenth Plaintiff : Mr K G Robson & Mr C J Hewitt
First Defendant : Mr J McGrath
Second Defendant : Mr J McGrath
Third Defendant : Mr J McGrath
Fourth Defendant : Mr J McGrath
Fifth Defendant : Mr J McGrath
Sixth Defendant : Mr J McGrath
Seventh Defendant : Mr J McGrath
Eighth Defendant : Mr J McGrath
Ninth Defendant : Mr J McGrath
(Page 5)
- Tenth Defendant : Mr J McGrath
Eleventh Defendant : Mr J McGrath
Twelfth Defendant : Mr J McGrath
Thirteenth Defendant : Mr J McGrath
Fourteenth Defendant : Mr J McGrath
Fifteenth Defendant : Mr J McGrath
Sixteenth Defendant : Mr J McGrath
Seventeenth Defendant : Mr J McGrath
Solicitors:
First Plaintiff : Deacons
Second Plaintiff : Deacons
Third Plaintiff : Deacons
Fourth Plaintiff : Deacons
Fifth Plaintiff : Deacons
Sixth Plaintiff : Deacons
Seventh Plaintiff : Deacons
Eighth Plaintiff : Deacons
Ninth Plaintiff : Deacons
Tenth Plaintiff : Deacons
Eleventh Plaintiff : Deacons
Twelfth Plaintiff : Deacons
Thirteenth Plaintiff : Deacons
Fourteenth Plaintiff : Deacons
First Defendant : Gibson & Gibson
Second Defendant : Gibson & Gibson
Third Defendant : Gibson & Gibson
Fourth Defendant : Gibson & Gibson
Fifth Defendant : Gibson & Gibson
Sixth Defendant : Gibson & Gibson
Seventh Defendant : Gibson & Gibson
Eighth Defendant : Gibson & Gibson
Ninth Defendant : Gibson & Gibson
Tenth Defendant : Gibson & Gibson
Eleventh Defendant : Gibson & Gibson
Twelfth Defendant : Gibson & Gibson
Thirteenth Defendant : Gibson & Gibson
Fourteenth Defendant : Gibson & Gibson
Fifteenth Defendant : Gibson & Gibson
Sixteenth Defendant : Gibson & Gibson
Seventeenth Defendant : Gibson & Gibson
(Page 6)
Case(s) referred to in judgment(s):
Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353
Bothranch Pty Ltd v Monitronix Ltd (1999) 15 ACLC 35
Cotter v National Union of Seamen [1929] 2 Ch 58
Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation (1952) 86 CLR 335
Edwards v Halliwell [1950] 2 All ER 1064
Federal Commissioner of Taxation v Angus (1961) 105 CLR 489
Federal Commissioner of Taxation v Patcorp Investments Ltd (1976) 140 CLR 247
Foss v Harbottle (1843) 2 Hare 461; 67 ER 189
Harben v Phillips (1883) 23 Ch D 14
Jalmoon Pty Ltd (In Liq) v Bow [1997] 2 Qd R 62
Kingston v Keprose Pty Ltd (No 3) (1987) 11 NSWLR 404
Millar & Ors v Houghton Table Tennis & Sports Club Inc [2003] SASC 1
NSW Henry George Foundation v Booth (2002) 54 NSWLR 433
Oatmont Pty Ltd v Australian Agricultural Co Ltd (1991) 5 ACSR 75
Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1996) 20 ACSR 553
Re Renown Rubber Ltd [1933] St R Qd 324
Solicitor-General v Wylde (1945) 46 SR (NSW) 83
Spitzel v Chinese Corporation Ltd (1899) 80 LT 347
Stevens v Keogh (1946) 72 CLR 1
Case(s) also cited:
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Aloridge Pty Ltd (provisional Liquidator appointed) v WA Gem Explorers Pty Ltd (In Liq) (1996) 22 ACSR 484
Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399; 132 ALR 1; 69 ALJR 890; 13 ACLC 1,698
Brian v Judo Federation of Australia (Qld) Ltd (1994) 15 ACSR 708
Carlton Cricket & Football Social Club v Joseph [1970] VR 487
Commissioner for Corporate Affairs v Sansom [1981] WAR 32
Farmers' Mercantile Union & Chaff Mills Ltd v Coade (1921) 30 CLR 113
Howard v Mechtler (1999) 30 ACSR 434
Jones v Money Mining NL (1995) 17 ACSR 531
K T & T Developments Pty Ltd v Tay (1995) 13 WAR 363
(Page 7)
Keightly, Maxstead & Co v Durant [1901] AC 240
Lorenzi v Lorenzi Holdings Pty Ltd (1993) 12 ACSR 398
Malthouse v Adelaide Milk Supply co-operative Ltd [1922] SASR 572
Minsoul Pty Ltd v Federal Commissioner of Taxation (1974) 48 ALJR 283
Norths Ltd v McCaughan Dyson Capel Cure Ltd (1988) 12 ACLR 739
Numin Holdings' Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74
Nyulasy v Rowan (1891) 17 VCR 663
Pender v Lushington (1877) 6 Ch D 70; 46 LJ Ch 317
Precision Data Holdings Ltd v Titan Hills Australia Ltd (1990) 2 ACSR 707; 9 ACLC 151
Rayfield v Hands [1958] 2 All ER 194; [1960] Ch 1
Re Clifton Springs Hotel Ltd [1939] VLR 27
Re Compaction Systems Pty Ltd [1976] 2 NSWLR 447; (1976) 2 ACLR 135
Re F H Ring & Co Ltd [1924] SASR 138
Re Gambrinus Lager Beer Brewery Co Ltd (1886) 12 VLR 446
Re Independent Quarries Pty Ltd (1994) 12 ACLC 159
Re Queensland Petroleum Management Ltd [1989] 1 Qd R 549
Re Spargos Mining NL (1990) 3 ACSR 1
Registrar-General v Northside Developments Pty Ltd (1989) 14 NSWLR 571
Specialty Press Ltd v Industrial Equity Ltd (1977-1978) CLC 40-339; FCt SCt of Vic
Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722; 10 ACSR 699; 11 ACLC 629
Sung Li Holdings Ltd v Medicom Finance Pty Ltd (1995) 13 ACLC 955
Watson v J & A G Johnson Ltd (1936) 55 CLR 63
White-Gourley & Anor v Goonan & Ors (1935) 37 WALR 99
(Page 8)
1 EM HEENAN J: By their originating summons of 27 May 2003 the plaintiffs are seeking a declaration that a constitution dated 18 January 1999 is the true and lawful constitution of Dancesport Australia Ltd (the seventeenth defendant). They also seek an injunction to restrain the defendants from relying upon the results of a postal ballot of members of the seventeenth defendant in April 2003 to procure special resolutions of the members to endorse and ratify all steps taken and decisions implemented by the board as and from 15 April 2000 and to resolve that a draft constitution dated March 2003 be adopted as the constitution of the company. In addition, the plaintiffs seek a declaration that the first to the sixteenth defendants (inclusive) and all other individuals who hold office in the company have not been properly appointed and have been acting ultra vires since April 2000.
2 As well, the plaintiffs seek orders that the first to the sixteenth defendants (inclusive) be removed from office as directors of the company and be replaced by an interim board to be appointed by the court later after submissions from the parties regarding suitable candidates for those positions and after receiving further evidence of candidates being willing to act in that capacity if so appointed. Further, the plaintiffs also seek an order that such an interim board, if so appointed, should convene a general meeting of the members of the company within 90 days at which time all office bearer positions would be vacated and elections held to appoint a new board of directors. Consequential directions for the conduct of the proposed general meeting, with particular reference to attendance and voting by electronic means, are also sought.
3 The plaintiffs claim further relief that each of the first to the sixteenth defendants be ordered to reimburse the company for all legal fees paid by the company since October 2002 and, in addition, that those defendants should pay the plaintiff's costs of these proceedings on a solicitor and client basis.
4 The heart of the plaintiffs' case is that the constitution of Dancesport Australia Ltd remains the original constitution adopted at the date of incorporation on 12 February 1999, under which, so they claim, some of the plaintiffs and an estimated 3500 or so other persons around Australia became members of the company before April 2000.
5 Because of this primary contention, the plaintiffs submit that a special resolution passed by a meeting of six members of the company in April 2000 to approve and adopt a new constitution (the April 2000 constitution) was invalid and ineffective because of lack of notice to, or
(Page 9)
- any participation by, the larger membership of the company of 3500 persons or more whom the plaintiffs maintain were members at that date. Since the April 2000 constitution was adopted by the company at the meeting of the six, the company has been controlled by a board of directors, including at times the first to the sixteenth defendants, whom the plaintiffs submit have all been invalidly appointed and who they say have acted ultra vires. It is for this reason that the plaintiffs seek an order removing from "office" each of the first to the sixteenth defendants, and a declaration that none has been properly appointed and that each has been acting ultra vires since April 2000. It is also the reason why the plaintiffs are seeking orders for monetary compensation requiring the first to the sixteenth defendants to repay fees incurred by the company since that date, largely, it appears, in relation to the defence of these proceedings.
6 The answer made by the defendants to the plaintiffs' case is that none of the plaintiffs, nor any of the other 3500 or so persons around Australia, was a member of Dancesport Australia Ltd at or before 15 April 2000. The defendants' case is that from the date of incorporation on 12 February 1999 until 15 April 2002 the only members of the company were the eight individual subscribers to its incorporation and that it was they, or a sufficient majority of them after due notice had been given, who passed the special resolution on 15 April 2002 approving and adopting the new April 2000 constitution. On this basis the defendants assert that the April 2000 constitution was validly adopted and, despite some shortcomings which are in need of attention by suitable amendments to comply fully with the provisions of the Corporations Act in relation to proxy voting, and in some other respects, it remains the lawful and effective constitution of the seventeenth defendant.
7 It was a series of attempts by the defendants to propose and effect the passage of special resolutions of the company to amend the April 2000 constitution to address and overcome admitted shortcomings to ensure full compliance with the requirements of the Corporations Act 2001 and to make effective and practical arrangements for the conduct of general meetings so that the large membership in all the States and Territories could effectively participate and vote in a manner which would not result in undue expense which has led to these proceedings. The plaintiffs claim to restrain those attempts, on the basis that the company is purporting to act under the invalid and ineffective constitution of April 2000, rather than its original constitution of 18 January 1999.
8 Similarly, the plaintiffs' claims for relief requiring the first to the sixteenth defendants to repay to the company legal expenses derives from
(Page 10)
- the plaintiffs' assertions that none of the first to the sixteenth defendants has been validly appointed and that they have all been wrongfully exercising power as directors, including their participation in decisions to engage solicitors and counsel in relation to these proceedings and in relation to the attempts to amend the April 2000 constitution and ratify decisions taken by themselves when acting as de facto directors.
The parties
9 The seventeenth defendant, Dancesport Australia Ltd, is a company limited by guarantee incorporated on 12 February 1999 with a constitution of that date.
10 The 14 plaintiffs claim to have been members of Dancesport Australia Ltd from various different dates. Three of the plaintiffs, Mr Damien Ciranna (third plaintiff), Mrs Anne Farrawell (tenth plaintiff) and Mr Frank Raccuia (fourteenth plaintiff) claim to have applied for membership and to have been accepted as a member of the company before April 2000 - in Mr Ciranna's case, at some time before April 2000, in Mrs Farrawell's case, since 13 August 1999 and in Mr Raccuia's case, from a date in the period between July and November 1999, that is at times when, all parties accept, the original constitution remained in effect. The remaining 11 plaintiffs allege that they applied for and were accepted as members of Dancesport Australia Ltd after April 2000 and, all but the fourth plaintiff, Mr Antonacci, claim that he or she has continued to be a member of the company until after the commencement of these proceedings. It is an agreed fact that Mr Antonacci ceased to be a member of the company on 31 December 2002 but there is no challenge to his standing to participate in these proceedings on that or any other account. The agreement on facts between the parties recites that (except for Mr Antonacci) the plaintiffs all remained members of the company at 31 December 2003. In cross-examination it emerged that Mr Raccuia and Mrs Kopilovic had not renewed their membership of the company for the year commencing 1 January 2004 but each asserted an intention to do so and claimed to be within the period of grace allowed by the company for the payment of annual membership fees. Again, no point was taken by the defendants about the standing of these plaintiffs to maintain these proceedings.
11 The first 16 defendants are all currently registered as directors of Australian Dancesport Ltd in returns lodged with the Australian Securities and Investments Commission ("ASIC") and claim to be lawfully appointed as the current directors of the company. Of these 16, five claim
(Page 11)
- to have been directors properly appointed from the date of incorporation, 12 February 1999: they are, Mr D F Gatley, Mrs M A Lonsdale, Mr V R Bain, Mr T J Tilenni and Mr R J Steele (the first, second, seventh and ninth defendants). The 11 other defendants were lawfully appointed, so they allege, at various dates from 12 September 2000 to 15 March 2003 and all remain in office.
Background
12 Ballroom dancing has a wide following and a long history in Australia through active participation in all States and Territories. During the period from about 1982 until 1996 the principal organisations through which ballroom dancing was organised or conducted were the Australian Dancing Board ("ADB") and Australian Dancesport Federation Inc ("ADF"). The former was largely concerned with the control and accreditation of professional dancers, whereas ADF was largely concerned with the accreditation organisation, training and competition of amateur dancers. Unfortunately, frictions and rivalries developed between these two parent organisations and their supporters, so much so that by the early 1990's a widening consensus was developing among the office bearers of both organisations that it was desirable for there to be a co-ordination and unification of all ballroom dancing operations within the country which would lead to the establishment of a new single national organisation to represent, co-ordinate and accredit all aspects of dancing.
13 This movement towards consensus led to a meeting in Sydney in August 1996 between four representatives of the ADB and four representatives of the ADF to discuss satisfactory means of restructuring the ADB and, in particular, to remove the professional/amateur divide which had, in the past, become entrenched and which had led to rivalries and disagreements. This meeting of the eight representatives in August 1996 led to the establishment of a group of eight under the name "National Joint Committee" ("NJC") whose principal task became to recommend a series of principles and proposals which would be acceptable to members of the ADB and of the ADF and which could lead to the establishment of a new structure for ballroom dancing.
14 In September 1996 the eight members of the NJC were able to agree upon a series of principles which, it was hoped, would lead to the establishment of a single national organisation. These principles, necessarily broad and in need of more detailed formulation before implementation, were that the members of the ADB and the ADF would:
(Page 12)
- • establish a new structure for Dancesport with direct, appropriate representation which would be organised and conducted under democratic sporting principles;
• assign to the new structure all such powers, functions and resources that were required for the good order and administration of Dancesport;
• have a transitional period and agreed processes to implement change;
• fund further meetings of the National Joint Committee (NJC) to develop the structures and principles of the new organisation;
• conduct open meetings in all States to explain the new structure and receive feedback;
• disband the ADF and transfer to the new body all of its assets, rights and entitlements.
15 Following upon this agreement in principle the NJC held a series of meetings over the next 12 months in an endeavour to settle the detail of the proposed new structure to be known as "Dancesport Australia". These were followed by open meetings of members of the ballroom dancing organisations in all the States. The basic concept was that all participants would be members of the new organisation upon registration in one or more of several capacities, namely, competitor, coach, adjudicator or scrutineer. The NJC proposed and agreed that:
• Membership was to be open to parents and volunteers. This proposal to include all full fee paying competitors, parents and volunteers as members with the right to vote in the affairs of the new organisation was a major innovation.
• Attempts would need to be made to prevent "stacking" and destabilisation of the new body and, for that reason, proxy voting was to be excluded.
• The new organisation, Dancesport Australia, was to be a single national body with direct individual membership rather than a national body of which a number of separate
(Page 13)
- bodies at State or Territory level, themselves incorporated, would be members or affiliates.
- • The details of the corporate structure were deferred for consideration after later advice and discussion.
• The proposed organisation, Dancesport Australia, was to have three national arms comprising: National Council; National Executive; and National Commissions together with State Branch arms.
• To avoid the problems of "stacking" and to minimise the effects of any attempts at destabilisation a proposal to allow voting by mail, as a substitute for proxy voting, was recommended.
16 The discussions and meetings in the various States and Territories and the further consideration of feed-back by the NJC all took some time but steady progress was being made towards the incorporation of a company to be known as Dancesport Australia Ltd to provide the unifying function which so many of the participants plainly desired. In March 1998 the NJC issued a press release renaming itself the "Dancesport Australia Committee" and advising members of the ADB and ADF that from then on this committee would administer all aspects of the unincorporated body Dancesport Australia until the new DSA National body was incorporated.
17 At that point there seems to have been a substantial expectation that the new company would be incorporated and be ready to operate some time in 1999 but, as so often happens in organisations which depend on representation from different groups with membership spread throughout the country, the ambition took longer to realise than was initially expected. Nevertheless, the NJC under its new name of Dancesport Australia, itself a an unincorporated association, continued to organise, co-ordinate, accredit and manage all aspects of dancesport in this country from mid-1998 onwards. Among other things, this role involved the receipt of substantial amounts of money for membership, competition and other fees and the payment of expenses of the operation of Dancesport Australia and its various competitions throughout the country.
18 The structure of Dancesport Australia during this time, as a committee of eight representatives, could not conveniently receive this income and pay the expenses because of the inevitable practical problems for members of an unincorporated association in operating a bank
(Page 14)
- account. A practical expedient was found, however, under which the ADB would provide one of its bank accounts for the use of Dancesport Australia, as an accommodation, so that all the income of Dancesport Australia and all its expenses would be paid in or out of the ADB account which, at least at a practical level, would be operated and controlled by the committee of eight operating under the name Dancesport Australia. This expedient was only intended to last for the short term until the incorporation of the new company for Australian dancesport was achieved including, as a necessary component, the adoption of a constitution which reflected the guiding principles which had been established at the August and September 1996 meetings of the NJC.
19 However, for reasons which did not fully emerge in the evidence but which are, in any event, immaterial, the ADB later expressed reservations about these banking arrangements and indicated that a situation might soon develop leading it to withdraw this accommodation. This introduced a new note of urgency causing the eight members of the unincorporated association Dancesport Australia to accelerate the moves towards incorporation, so much so that the company limited by guarantee, which was incorporated on 12 February 1999, adopted a pro forma constitution which all concerned realised, and accepted, did not give adequate recognition to the founding principles agreed upon by the NJC. The eight subscribing members appreciated that this would require major change in order to satisfy the representations and promises which had been made to the members of ADB and the ADF in the various State and Territory meetings and in the consultations which had been held during the period that this new proposal had been under consideration. There is really no doubt on the evidence, and I am quite satisfied, that the urgent pressing imperative which led to the incorporation of Dancesport Australia Ltd in February 1999 was the need to have secure and independent banking facilities which the company could provide for the operation of Dancesport Australia.
20 The subscribers to the original constitution of Dancesport Australia Ltd were the eight members of the unincorporated association which had been operating under the name Dancesport Australia and who were the eight members of the former National Joint Committee. They included five of the present defendants (Gatley, Lonsdale, Bain, Tilenni and Steele) and three others who are not parties to these proceedings, namely, Brian Keith Searle, Keith Withers and Geoffrey Pym. Six of these eight subscribers were appointed, and acted, as the original directors of Dancesport Australia Ltd.
(Page 15)
21 The funds which had been held in the account of the ADB under the accommodation arrangements were transferred to a newly established bank account for Australian Dancesport Ltd. Some of the moneys so transferred into the bank account of the new company were treated as being on loan to the company from the ADB. From then on, however, moneys received from competitors or from other sources of operations by Dancesport Australia including membership fees were banked into the new company account and expenses were paid from the account.
22 Despite the incorporation of Dancesport Australia Ltd in February 1999 and the establishment of banking facilities in its own name as described, these developments were treated by the eight persons who were, simultaneously, members of the national committee of Dancesport Australia (unincorporated), and the subscribers of the new company, as part of the transitional arrangements. These included the six directors of the company. This was because the constitution of the new company was then not considered to be suitable for submission for consideration by the wider membership of Dancesport Australia as originally intended.
23 What happened was that the operations and organisation of Dancesport Australia continued to be conducted largely, but not entirely, under that name rather than under the name of the company, Dancesport Australia Ltd, and the company continued with only the original eight subscribers as members under the expectation that, before long, a new constitution would be prepared which would be suitable for adoption by those eight members but that only after that point had been reached would it be practicable to offer membership in the company to the wider supporters of Dancesport throughout Australia. Until that time was reached Dancesport Australia would continue to be conducted by this committee of eight as an unincorporated association but with many thousands of subscribing members throughout all the States and Territories.
24 This anomalous position continued from February 1999 until 15 April 2000 when, after even longer delays than had been envisaged in February 1999, a new constitution for Dancesport Australia Ltd in what was believed to be satisfactory terms reflecting the original principles and guidelines agreed upon by the NJC in August and September of 1996 was prepared. During this period from February 1999 until April 2000 the affairs of Dancesport Australia were conducted and controlled by this group of eight persons. To some extent six of them acted as the directors of Dancesport Australia Ltd and dealt with the affairs of the company. In other respects they all acted as a national executive of Dancesport
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- Australia, an organisation with a large membership which was not treated as being members of the company.
25 To an outsider it was not readily apparent that there was any distinction maintained between the interim organisation Dancesport Australia and the newly incorporated company, Dancesport Australia Ltd. The group of eight persons, whether acting as directors or as members of the national executive of the unincorporated Dancesport Australia, did not disclose to the "members" in the various States and Territories that any such difference existed. Annual memberships for Dancesport Australia were renewed and solicited, branches were established or maintained in the separate States and Territories and branch registrars were encouraged to issue and receive membership applications and collect the associated fees which were eventually collated and, less necessary operating expenses, were remitted to the company and banked in the company bank accounts. Expenditure of the funds so accumulated was authorised by the six directors from the company bank account although, in the minds of the entire eight, the activities and the business which was being operated by Dancesport Australia continued to be for the members of the unincorporated association because, in their view, no-one other than those eight had been admitted as a member of the company whose constitution was still undergoing development.
26 Branch registers of Dancesport Australia were maintained in the various States and Territories and the affidavits establish clearly that in the Northern Territory the branch registrar solicited and renewed memberships and maintained a branch registry recording the names of members, a description of the categories of their membership, the receipts issued for the payments of their fees and their membership card numbers. There are no actual issued membership cards during this period which are in evidence, but there are blank forms which have been verified as those which were in use during that period. These show that for the 1999/2000 year the application for membership with Dancesport Australia (DSA) related to a company limited by guarantee with ACN 085 929 835 and that the proposed applicant agreed to be bound by the constitution and rules and by-laws of the company. Similar blank forms for application for membership/registration with Dancesport Australia Ltd for the 1999/2000 year recorded that the proposed applicant made application for membership of Dancesport Australia Ltd and in so doing agreed to be bound by the constitution rules and by-laws of the company and agreed to provide a guarantee of not more than $20 to defray such liabilities and expenses of the company upon its winding-up or dissolution. There is no doubt that many applications were made upon these standard forms,
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- moneys paid and received, and, after the deduction of expenses, remitted and banked into the company bank account. Notwithstanding this, none of the names of these applicants was formally recorded as a member of the company, although all the applications on the authorised form were obviously for membership or registration as members of the company and the net application moneys were banked to the credit of the company.
27 It has been alleged on behalf of the plaintiffs that, in some cases, membership forms in the name of the company were issued to the various applicants by the State or Territory registrars, but no such membership form in the name of the company has been produced in evidence, although I conclude that it is probable that membership forms of this type were issued in large numbers by at least one and probably by several of the State or Territory branch registrars. The pertinent issue arising from this, however, is whether or not the issue of such a membership form by a branch registrar in these circumstances had the effect of accepting the applicant as a member of the company. As will emerge, this appears to be the central issue in this case but before addressing it directly it is necessary to describe more of the background.
28 There is no suggestion, nor could there be any foundation for concluding, that in these respects any of the eight members of the National Committee and members of the company including the six directors of the company between February 1999 and April 2000 was intending to deceive members of Dancesport Australia or applicants for membership of the company. I am satisfied, on the evidence of Mr Bain and Mr Gatley, that the belief of the eight directors and members of the national executive was that the constitution of the company as it was at incorporation in February 1999 did not faithfully fulfil the promises and representations which had been made to the various branches of the ADB and the ADF during the 1996 - 1998 period and that it would inevitably have caused disruption and rejection of the unifying national initiative if that constitution were to have been put to the members of the participating organisations in that form. Their position was that considerable work still needed to be done to alter that constitution in order for it to conform to the guidelines of the model proposed in 1996 and that, until a detailed constitution satisfying those representations could be proffered for acceptance, it was better to continue the operations of Dancesport Australia through the medium of the national committee as an unincorporated association but using the facilities of the newly incorporated company, Dancesport Australia Ltd, to handle the money as a progression from the accommodation arrangement which had previously existed with the use of the bank accounts of the ADB until early 1999.
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29 That this situation should have been more fully disclosed to the former members of the ADB and the ADF and, in particular, to applicants for membership in the company Dancesport Australia Ltd is now so obvious that one can only wonder at how it was thought that such practices would be acceptable even in the short term. However, there is no doubt that that is what was done, nor any doubt about the good faith of the eight members of the National Committee including the directors of the company who were dealing with the affairs of these organisations during this transitional period.
30 By April 2000 a new constitution in terms which were believed to be acceptable to the intended membership of the company had been prepared. A meeting of the company was held in Sydney on 15 April attended by six of the eight members and directors and with apologies from the other two. This was in effect a general meeting of the company, and the following special resolution was passed:
"That the constitution of Dancesport Australia Limited be altered with immediate effect by deleting all clauses in the current constitution and replacing them with the clauses attached hereto."
- The "clauses attached" comprised the constitution of April 2000 which was tabled and distributed at that meeting. The resolution was passed unanimously.
31 Immediately after that motion was passed, a further special resolution was proposed and passed in the following terms:
"That all persons who have properly completed the appropriate combined membership and registration/license application and who have paid the appropriate fee for the 1999/2000 financial year be admitted as Members in the appropriate category with the relevant rights as described for that category of membership in the revised constitution."
- This was also passed unanimously.
32 The next item of business was the appointment of 13 persons as directors of the company, subject to their consent. The directors so appointed included five of the present defendants (Bain, Kimmins, Steele, Wiggins and Wilton) and that motion, too, was carried.
33 Consequently, the defendants submit that the result of the meeting of 15 April 2000 was that a new constitution (the April 2000 constitution)
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- was adopted and approved at a duly convened meeting of all members of the company by the requisite majority and thereupon it replaced the earlier constitution at the date of incorporation in February 1999. In addition, the membership of the company expanded from the original eight to include all the applicants who had completed application forms in the proper manner and who had tendered payment which had been received, but not fully processed, up to that point and that new directors of the company were validly appointed.
34 From April 2000 onwards there is no doubt that the company and the defendants have treated the membership of the company as comprising up to some 3,500 or more persons in the various States and Territories who had, at various times after February 1999, lodged and renewed annual applications for membership in Dancesport Australia Ltd.
35 The defendants' position, as was put colloquially during the course of the trial, was that applications for membership of the company which had been received after January 1999 but before April 2000, had not been processed but had been "parked" in the unincorporated association Dancesport Australia until the change in the constitution effected at the meeting of 15 April 2000 had been completed. From that point on they were all admitted to membership and have been treated as members and, where they have renewed their membership will continue to be treated as members of the company. It is the defendants' case that the applicants for membership before 15 April 2000 did not immediately become members of the company but, in practical terms, they had the advantage of membership because the operations of Dancesport Australia were during this period being conducted by the committee of eight and all the persons who had applied for membership in fact enjoyed the privileges of membership while the operations were being conducted in that way.
36 The plaintiffs, not surprisingly, submit: that during this period between February 1999 and April 2000 Dancesport Australia Ltd was held out to them by the National Committee of eight as being the organisation, recently incorporated, which conducted, operated and accredited ballroom dance in Australia; that branch registrars solicited membership in the name of the company and on forms which required an applicant to agree to be bound by the constitution and rules of the company, and; that the application fees for membership, after deduction of necessary operating expenses, found their way into the bank account of the company. This combination of processes, so the plaintiffs submit, means that each of the applicants was necessarily accepted as a member of the company and as such was entitled to notice of the meeting of
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- 15 April 2000 and of the proposed special resolution to adopt a new constitution for the company. In the absence of such notice and with the exclusion of large numbers of "members" from any vote on the adoption of the new constitution, the plaintiffs submit that the resolutions of the meeting of 15 April 2000 are invalid and ineffective and that the original constitution remains as the only valid and effective rule for the company's affairs.
37 Notwithstanding the actions of the directors of the company before April 2000 and the processes followed which, I accept, led the third, tenth and fourteenth plaintiffs to believe that they were applying for and had been accepted as members of the company Dancesport Australia Ltd before April 2000, it is quite clear that the directors of Dancesport Australia Ltd did not intend to admit, nor did they believe that they had admitted, any of the many applicants for membership of the company until after the new constitution had been adopted on 15 April 2000. I have no reservations in accepting the evidence of Messrs Bain and Gatley in this respect and I understand that, in the minds of the six directors of the company, there were substantial and respectable reasons why they believed that the membership of the company should remain at the original number of eight until the new constitution had been formally adopted.
38 If there is a cloud which hangs over the conduct of these eight members and six directors it is because their actions and the reasons for these actions were not fully disclosed to the plaintiffs or to the other applicants for membership in the company. However, the defendants' position is that the eight believed that they would have the support of the proposed membership base for the course which they followed and that ratification of their actions could be secured by a resolution of members.
39 It was with this in mind that the new directors of the defendant, a larger group of 17, attempted in April 2003 to conduct a postal vote of members to ratify these actions and to approve further amendments to the constitution which by then had been discovered were necessary to comply fully with the requirements of the Corporations Act. This attempt was opposed by the plaintiffs on the grounds that the 1999 constitution, which they contended remained in effect, did not authorise a vote of members by post - neither did the April 2000 constitution which the defendants asserted applied. Following the commencement of these proceedings the defendants have accepted that a postal vote of members to authorise changes in the 2000 constitution is not possible and that attempts which they had made to amend the constitution and amendments to the
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- constitution which had been recorded as a result of those attempts later in 2003 are ineffective. They have formally undertaken that these attempts will not be relied upon in any way.
40 The position of the defendants is that, if this Court should declare that the April 2000 constitution has been validly adopted, they will then convene a new general meeting of the company to propose such further amendments to that constitution as may be considered necessary to make adequate provision for proxy voting, for the establishment of a quorum and for other matters necessary for full compliance with the Corporations Act and have these put as special resolutions to the broad membership of the company for consideration and, if a requisite majority is attained, approval. At the same time it is the defendants' intention to propose a further resolution for consideration at a general meeting of the company which, if approved, would have the effect of ratifying the actions of the directors in delaying admission to membership of applicants who had lodged and paid application fees before April 2000 in the manner described.
41 If such ratification can be obtained from the membership then the defendants contend that their actions will have been legitimated, but whether or not this will be the result is not an issue on this originating summons. Because it remains an hypothetical issue, I will not consider it further except simply to observe that even if such a ratification were to be obtained a dissentient member who had applied and paid for membership in the company before April 2000 in the belief that he or she would immediately be admitted to membership, may be entitled, on demand, to have his/her name removed as a member of the company and to recover any moneys which he or she had paid.
42 The evidence establishes that Dancesport Australia Ltd did not keep a detailed register of members before April 2000 and that the list of members which was maintained after that date did not fully comply with the requirements of the Corporations Act because it failed to disclose the dates upon which individual members were admitted as members or ceased to be members. There was, nevertheless, an electronic database kept which recorded the names and addresses of all the applicants for membership, being those persons who were treated as members of the unincorporated association Dancesport Australia before April 2000. This is a very long list of names. I have been informed by counsel, although it has not been necessary to obtain precise confirmation, that it runs to more than several thousand. Similarly, the database for members whom the defendants acknowledge have been accepted as members after April 2000
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- also runs to more than several thousand persons. However, accepting as I do the evidence of Messrs Bain and Gatley, I am satisfied that there was no formal acceptance of any more than the original eight members of Dancesport Australia Ltd before 15 April 2000 and that this was the result of a deliberate policy of the directors of the company until then to confine the membership to the original eight subscribers.
Formalities for membership
43 The February 1999 constitution of Dancesport Australia Ltd includes the following clauses relating to membership:
" Membership
Eligibility, application and admission
8. Any natural person or corporation (incorporated or otherwise) committed to the objects of the Company may be a member of the Company provided:
(i) application for membership is made on the prescribed Application Form and the determined fee has been paid;
(ii) the person or corporation agrees in writing to provide a guarantee of not less than twenty dollars ($20) to defray such liabilities and expenses of the Company upon its winding up or dissolution;
(iii) the Application for Membership has been accepted by the Board and such acceptance may be determined by the Board using any criteria as the Board alone may determine; and
(iv) the name of the member has been entered in the Register of Members.
9. The Board may decline any Application for Membership and is not bound to give reasons why the application was not accepted.
10. The first members of the Company shall be the subscribers to this constitution and they shall not be required to apply for membership."
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- The position of the defendants in these proceedings is that no applications for membership were accepted by the board before April 2000 and that no member's names, nor the names of any applicant for membership, had been entered in the register of members before April 2000.
Nature of these proceedings
44 At this point it is important to emphasise that the plaintiffs have instituted the present proceedings by an originating summons by which they seek a declaration that the constitution of the company of February 1999 remains the only valid and lawful constitution and that, consequentially, they are entitled to injunctive and other relief designed to preserve the status quo and to allow, and in some cases to compel, the provisions of the February 1999 constitution to take effect.
45 Although the provisions of the Rules of the Supreme Court O 58, r 14(5) and O 81G, r 11(3)(b) were brought to the attention of the plaintiffs, and the plaintiffs invited to specify what, if any, particular statutory provision was relied upon or to identify what statutory relief was being sought, the plaintiffs maintained that these proceedings involved no more than the construction of written documents and the determination of the significance of facts to be proved by the evidence so enabling the court to grant relief under O 58 r 10 without resort to other enabling powers. In particular, no attempt has been made by the plaintiffs to seek any rectification of a register of members of Dancesport Australia Ltd to include in the register the names of any of the plaintiffs or others as members of the company at any time before 15 April 2000. Neither do the plaintiffs seek any positive order by way of injunction or otherwise compelling the seventeenth defendant to establish a register of members to incorporate all or any of the applicants for membership who lodged applications or paid application fees before April 2000. Only three of the plaintiffs alleged that they became members of the company before April 2000 but their case simply is that they were members before that date, notwithstanding the state of the company's records suggesting the contrary.
46 No person out of the very large number of others who, as the evidence discloses, made application for membership of Dancesport Australia Ltd during the interval between February 1999 and April 2000 and who paid application fees for this purpose, but who did not have his or her name recorded as a member before April 2000, has applied to have his or her name entered as a member before that date by seeking an amendment of any register of members, or otherwise. Nor has there been
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- application made to wind up the company or to seek any other relief for oppression under ch 2F of the Corporations Act because of alleged impropriety or otherwise by the directors in failing to record as members the names of persons who had applied for membership and paid membership fees before April 2000. Consequently, I am only required to decide, and can only decide, whether the plaintiffs have established that persons other than the original eight subscribers, had become members of the company before 15 April 2000. Putting this a different way, I am not required to consider, and therefore should not consider, whether or not any of the persons who applied for membership of the company between February 1999 and April 2000 by completing the requisite application form properly and paying the necessary fee, was legally entitled, then or is entitled now, to be admitted as members of the company, when they were not so admitted, even if the reasons for their exclusion were unjustified.
Requisites for membership of the company
47 Under s 231 of the Corporations Act 2002 membership of a company can be obtained in several ways. The section provides:
"231 Membership of a company
A person is a member of a company if they:
(a) are a member of the company on its registration; or
(b) agree to become a member of the company after its registration and their name is entered on the register of members; or
(c) become a member of the company under s 167 (membership arising from conversion of a company from one limited by guarantee to one limited by shares)."
- This sets out the basic rule that to become a member of a company, apart from subscribing for its original incorporation or registration, one must comply with the formalities prescribed by the rules or constitution of the particular company and have one's name entered on the register of members - a requirement specifically included, as previously noted, in cl 8(4) of the original constitution of this company.
48 Under earlier Australian companies' legislation it has repeatedly been held that the status of membership of a company requires that person to have his or her name recorded on the register of members so that, for example, persons who hold a beneficial interest in shares but who are not
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- registered as shareholders will not be treated as holding shares in the particular company in the absence of special statutory provisions which produce that effect: Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353; Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation (1952) 86 CLR 335; and Federal Commissioner of Taxation v Angus (1961) 105 CLR 489. Having reviewed these authorities, Gibbs J said in Federal Commissioner of Taxation v Patcorp Investments Ltd (1976) 140 CLR 247 at 295:
"These decisions affirm the general principle that entry on the register is necessary to constitute membership of a company, and clearly establish that the beneficial ownership of shares, without registration, does not make a person a shareholder."
His Honour then went on to consider the status of a person who, although entitled to be registered as a shareholder had not in fact been so registered at any particular time but who subsequently became registered, saying, at 296:
"If a person ought to have been on the register on a certain day and he is subsequently registered as from that day, speaking generally, I consider that it should be held that he was a shareholder on that day. The registration, assuming it to be a proper registration, operates retrospectively from the date on which it was effected to the date at which the name of the shareholder was entered in the register."
This point was also elaborated upon by Jacobs J at 303, where his Honour said:
"However, to say that in the law governing incorporated companies a person is only a 'shareholder' at any particular date if his name appears on the register of members at that date is an over-simplification. For some purposes, e.g. qualification as a director, it has been decided (prior to the enactment of what is now s 116 of the Companies Act 1961 (NSW)) that a person is only the holder of shares if at the date of his appointment as director he appears on the register of members - Spencer v Kennedy [1926] Ch 125. On the other hand it is fundamental to company law that despite the language of such sections as s 60(5) and s 151(1) the register of members is not conclusive. Indeed, s 151(4) makes it clear that the register is no more than prima facie evidence of the matters which it is required or authorised to contain. The provision in s 155 that the register
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- may be rectified embodies the concept that, once it is rectified, the rights of the person whose name is entered therein or removed therefrom are determined as at the date at which the rectification is ordered to have effect."
49 The litigation in Federal Commissioner of Taxation v Patcorp Investments Ltd (supra) involved an appeal from the issue of certain income tax assessments made by the Federal Commissioner. The appeal was heard at first instance by Mason J and then a further appeal was taken from his Honour's decision to the Full Court of the High Court. That affirmed the decision of his Honour in the first appeal. In his judgment in the first appeal Mason J said at 271 - 272:
"Although the word 'shareholder' ordinarily signifies a person who is registered as the holder of shares (see Avon Downs Pty Ltd v FCT (1949) 78 CLR 353 at pp 363 - 365), the word 'member' may be wide enough to include a subscriber to the memorandum who is a person whose name is not entered in the register of members (Companies Act 1961, s 16). The provisions of s 151(1) with respect to keeping of the register of members indicate that a person's character as a member is initially ascertained by reference to circumstances dehors the register.
The requirement in s 151 that there should be entered in the register '(b) the date at which the name of each person was entered in the register as a member' in my view refers, not to the date on which the entry was physically made, but to the date on which he should have been entered in the register as a member, that is, in the case of a subscriber to the memorandum, the date on which he subscribed and, in the case of a transferee, the date on which the directors approved the transfer, or resolved that it be registered. It is the duty of the officers of a company to give effect promptly to the company's obligation to enter the names of its members in the register. The statutory provision is to be read accordingly as authorising, indeed requiring, the entry in the register of the date when the directors approved, or directed the registration of, the transfer to the transferee."
50 Under cl 8 of the February 1999 constitution of Dancesport Australia Ltd an application for membership had to be accepted by the board of the company (cl 8(3)) and then the name of the member was to be entered in the register of members (cl 8(4)). In the case of the many applicants for
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- membership of the company during the period February 1999 to April 2000 it seems to be the case that the many applicants for membership (including three of the plaintiffs) did not have their applications accepted by the directors, nor did they have their names entered on the register of members. Their applications were simply put to one side for an indefinite period until after a new constitution had been approved and adopted by the original six directors.
51 It is also the case on the probabilities that many, if not all, such applicants for membership did not realise that their applications had been put into limbo for this indefinite period and believed that they were members of the company. Yet the fact of the matter is that it was the conscious decision of the board of directors to decline to accept such membership applications during this period and to decline to record the names of the applicants as members of the company on any register until after the April 2000 constitution had been approved and adopted.
52 Consequently, the situation which therefore occurred was more than a neglect or delay to accept the many applicants as members and to record their names on the membership register. If that had been all that had occurred an individual applicant, had he or she fully appreciated the position, may have been entitled by the institution of appropriate proceedings to compel the company to accept the application for membership and to record the applicant's name on the membership register. But in the present case, had an alert and determined applicant instituted any such proceedings, it is likely that he or she would have been met by a defence that the directors had declined to accept the membership application at that point and had, in the exercise of their powers, declined to accept any further members. In that case the aggrieved applicant may have been justified in demanding the return of his application moneys but that was never done and it is not sought to be done in these proceedings.
53 The principle that the status of a member of a company is not acquired until the applicant's name has been recorded on the register of members has also been applied in many subsequent cases. However, the plaintiffs' submissions relied heavily on the de facto benefits which applicants for membership of Dancesport Australia Ltd obtained during the period February 1999 to April 2000 stressing that, for all practical purposes, they had the advantages of membership in an organisation which conducted and controlled Dancesport and all its activities throughout Australia and that this was the result of representations made to them and publicly concerning the role which the company was intended to fulfil. All the outward indicia of membership of the company, the
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- plaintiffs contend, led them to believe that they were in fact members and that they enjoyed the benefits of the role of membership which they had been led to expect would occur. This situation, however, is not inconsistent with the peculiar status which the defendants maintain existed between February 1999 and April 2000 when the processing of applications for membership was simply put to one side pending the adoption of a new constitution.
54 It is true, of course, that in many cases compliance with the ordinary processes for membership can be inferred even if there is not express evidence to establish that any particular application or applications for membership were processed by the board. So, in Bothranch Pty Ltd v Monitronix Ltd (1999) 15 ACLC 35 the Full Court dismissed an appeal from a decision ordering rectification of the share register of a company to require the registration of certain shareholders whose applications for membership had been lodged but not duly processed. In the Full Court Kennedy J said at 48:
"In my opinion, in the present case, no special authority of the directors was necessary before share transfers could properly be registered. Once the transfers were lodged with NSTA the place where the share register was kept, no intervention of the directors was necessary to confer upon the transferees the right to be registered as holders of the relevant shares. Support for this view can be found in two cases ... Re Swaledale Cleaners Ltd [1968] 1 WLR 1710 ... [and] Re Zinotty Properties Ltd [1984] 1 WLR 1249 at 1261 ...
In principle, shares in companies are freely transferable and no formal exercise of power by directors is required. In this case, there were no prerequisites to registration laid down in the articles and there is, of course, no suggestion that the company purported to exercise its power under art 30 to refuse to register any transfers."
- These authoritative observations demonstrate that were the applicants for membership of this company during the period February 1999 to April 2000 able to demonstrate that they were entitled to be registered as members when their applications were lodged, their prospects of success in a claim for rectification of the register would be encouraging. However, that is not what has been sought to be done in these proceedings and cl 8(3) of the original constitution requires that any application for membership be accepted by the board. While it may be possible to infer
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- tacit acceptance in the absence of any reason to the contrary being shown, the situation in the present case demonstrates that the board positively declined to accept applications for membership before the change in the constitution in April 2000 and, on that ground, the decision in Bothranch Pty Ltd v Monitronix Ltd (supra) is distinguishable.
55 In Kingston v Keprose Pty Ltd (No 3) (1987) 11 NSWLR 404 the issue before the New South Wales Court of Appeal concerned who was a "holder" of renounceable options to acquire shares in a company for the purposes of the Companies (Acquisition of Shares) (NSW) Code, s 43(4). At 409 - 412, Hope JA, reviewed the "many decisions in the company law field supporting the view the words 'held' or 'holder' refer to the state of the register". Later, speaking of the decision in Federal Commissioner of Taxation v Patcorp Investments Ltd (supra), his Honour said:
" ... that the decisions affirmed the general principle that entry in the register is necessary to constitute membership of a company, and clearly established that the beneficial ownership of shares, without registration, did not make a person a shareholder. The decision also established that registration dates not from the time of actual entry in the register, but from the time the directors approve of registration: see (at 272) per Mason J; (at 295 - 296) per Gibbs J. Whatever the articles provide and whatever in the case of particular companies may be the strict position about the passing of the legal title to shares, it is in my opinion clear that a transferee does not become a shareholder until his name is on the register, the date of registration being deemed to be the date on which the directors approved registration of the transfer." (Pages 411 - 412.)
56 For a further illustration of the doctrine that eventual registration of an applicant as a shareholder of a company may take effect retrospectively so as to deem the shareholder a shareholder from the date upon which he became entitled to registration see Oatmont Pty Ltd v Australian Agricultural Co Ltd (1991) 5 ACSR 75 per Angel J at 84.
57 In Jalmoon Pty Ltd (In Liq) v Bow [1997] 2 Qd R 62 the Queensland Court of Appeal considered the question of whether or not a meeting of "shareholders", including persons who were entitled to be registered as shareholders but whose names had not been entered upon the register of members of the company, could approve an unauthorised payment of company moneys made by a director under the doctrine of
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- unanimous assent of the shareholders. That contention was rejected by the Court of Appeal and, at 69, Pincus JA and Helman J said:
"First, it was not established that at any relevant time Ivory was registered as a holder of all the shares. It therefore appears to be necessary, in order to apply the doctrine in the present case, to hold that the principle of unanimous assent covers instances in which some or all of the persons who assent are not registered shareholders. To accept that proposition would, as it seems to us, introduce an additional element of uncertainty into the operation of a principle the present basis of which is itself unclear. In Re Compaction Systems Pty Ltd and the Companies Act [1976] 2 NSWLR 477 at 484, Bowen CJ In Eq referred to the absence of authority for the proposition that the principle of Re Express Engineering Works Ltd [1920] 1 Ch 466, being the leading case on unanimous assent, applies where all persons beneficially entitled to shares agree. At the time when his Honour made that remark there was a direct authority on the point: In Re Sander's Ltd (1932) 49 WN (NSW) 220 at 221; it was held there that the relevant principle applies only to persons registered as shareholders. It is true that in some of the older cases one can find suggestions that persons not on the register may for various purposes be treated as shareholders, but that is not now an orthodox approach: see FCT v Patcorp Investments Ltd (1976) 140 CLR 247 and the cases referred to at 293, 294, 295; see also Kingston v Keprose (1987) 11 NSWLR 404 at 410 - 412."
59 Also, in respect of the power of the court in a case where there is a claim for rectification of a share register to direct that the registration so ordered may be backdated: see Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1996) 20 ACSR 553 per Bryson J at 559.
60 Therefore, as the only members of the seventeenth defendant at the time of the meeting of 15 April 2000 were the eight original subscribers, I am satisfied that they were the only members entitled to vote at, or receive notice of, the meeting of 15 April 2000 which approved and adopted the new constitution of the company by a special resolution. It also follows
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- that that meeting was validly convened and the new constitution adopted in the proper manner.
Validity of appointment of Directors
61 Amongst the relief sought by the plaintiffs by this originating summons is a declaration that the first 16 defendants and all other office bearers of the company have not been properly appointed in accordance with the constitution or at law and, consequently, have been acting ultra vires since April 2000. In addition, the plaintiffs seek orders removing from office as directors of the company those persons and the appointment of an interim board to be appointed by the court, together with other incidental consequential orders. In the light of my conclusion that the April 2000 constitution was validly adopted by the company, the appointments of directors and other office bearers subsequently, in accordance with that constitution, are valid. No other ground for suggested invalidity was asserted and, therefore, it is unnecessary to examine the details or instruments of the individual appointments made from then on.
62 It also follows that the plaintiffs have not demonstrated any grounds upon which it could be concluded that the directors, other officers of the company have been acting ultra vires since April 2000. Because the plaintiffs did not seek any statutory remedy which the court has jurisdiction to grant under the Corporations Act, no issue arose as to whether any act done by a director of the seventeenth defendant, if he or she had been invalidly appointed, was itself invalid or whether, in that eventuality, certain acts of that director or directors would be validated by virtue of the operation of s 201M of the Corporations Act. However, the declaration sought by the plaintiffs that the directors had been acting ultra vires since April 2000 is capable of implying that their actions would have been ultra vires had the April 2000 constitution not been validly adopted. In view of the conclusion which I have reached about the validity of the appointment of the directors it is not necessary to pursue this issue except to say that, had my conclusion been that the April 2000 constitution had not been validly adopted, it would not necessarily have followed that the plaintiffs would have been entitled to a declaration in the form which they were seeking. Of course, any validation of the actions of an invalidly appointed director which would be achieved by the application of s 201M would not extend to the validity of the appointment of that director or those directors - Re Renown Rubber Ltd [1933] St R Qd 324.
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63 Again, in view of the decision which I have reached about the validity of the adoption of the April 2000 constitution, there is no basis to require consideration of the plaintiffs' application for an order for the removal from office of the existing directors of the company or their replacement by an interim board to be appointed by the court, or for directions requiring the interim board to convene a general meeting of the company or for the manner in which that meeting should be conducted. However, had I reached a contrary conclusion about the validity of the adoption of the April 2000 constitution I would have refused to make any such orders or to grant any such directions on the basis that such remedies are outside the scope of the power conferred upon the court when determinating an originating summons under RSC O 58. For relief of this kind to be obtained it would be necessary for the plaintiffs to have brought proceedings under the Corporations Act, Pt 2F.1 seeking relief from oppressive conduct of the affairs of the company under s 233 or under Pt 2F.1A under s 236 or s 237. It was not submitted on behalf of the plaintiffs that there was any power for the court to remove a validly appointed director except in the exercise of its statutory jurisdiction under Pt 2F.1 in cases where it had been established that the affairs of the company had been conducted oppressively or unfairly. Had the directors been invalidly appointed, no specific order for their removal would have been necessary.
64 Similarly, any order requiring any of the first sixteen defendants to repay to the company legal fees incurred by the company since October 2002, as sought by the plaintiffs, would in my view require proceedings to be brought by the company, or by a person or persons authorised on its behalf under Pt 2F.1A of the Corporations Act in which proof of breach of fiduciary duty by the directors to the company resulting in actual loss or damage or conversion of company property would also need to be established. This was not done.
Attempts to change the company's constitution in November 2000 and April 2001
65 The facts agreed by the parties include the details of attempts to change the April 2000 constitution of Dancesport Australia Ltd in November 2000 and again in April 2001. On or about 11 and 12 November 2000 a meeting was held in Sydney attended by 17 persons, including the first, second, third, fourth, fifth, sixth, seventh, ninth and sixteenth defendants. The records of this meeting bear the title "Minutes of the Second Meeting of the Dancesport Australia National Council", see affidavit of Mr F Raccuia, vol 2, Annexure "FR 42" (part of Exhibit 1).
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- At this meeting a resolution was passed purporting to adopt a new constitution of the company in the form of Annexure FR 43 to Mr Raccuia's affidavit (Exhibit 1). This did not purport to be a general meeting of Dancesport Australia Ltd, nor is there any evidence to show that all the members of the company were given notice of the meeting or any opportunity to attend or vote. Although the resolution was carried unanimously at that meeting it does not purport to have been a resolution of a general meeting of the company, let alone a special resolution as required by s 136(2) of the Act.
66 Again, on or about 28 and 29 April 2001 a meeting was held attended by 16 persons, with apologies from one other. Those attending included the first, second, third, fourth, fifth, sixth, seventh, ninth and sixteenth defendants. The records of this meeting are described as being "Minutes of the Third Meeting of the Dancesport Australia National Council", and appear as Annexure FR 44 to the affidavit of Mr Raccuia, Exhibit 1. The parties are agreed that at this meeting a resolution was passed purporting to amend the November 2000 constitution. Again, there is no evidence of notice of this meeting being given to all the members of the company, nor of the membership having any opportunity to attend or vote at the meeting. There is simply no evidence upon which it could be concluded that the resolution passed at that meeting was a resolution of a general meeting still less a special resolution as required to amend the constitution in any way.
67 On or about 12 November 2002 Mr Gatley, on behalf of Dancesport Australia Ltd, caused to be filed at an office of ASIC a notice dated 12 November 2002 referring to the resolution of 15 April 2000 adopting the April 2000 constitution; the resolution of 12 November 2000 purporting to amend that constitution, and the further resolution of 28 or 29 April 2001 purporting to re-amend the constitution. Also on 12 November 2002 the first defendant lodged with ASIC a notice providing a copy of the purported constitution of Dancesport Australia Ltd as amended by the resolutions passed at the meetings of April 2000, November 200 and April 2001.
68 None of the defendants contended for the validity of the resolutions purportedly passed at the meetings held on 12 November 2000 and 28 and 29 April 2001. Nor did any of the defendants contend that the constitution of Dancesport Australia Ltd in the form lodged with ASIC on 12 November 2002 was the valid constitution of the company. Through their counsel the defendants all accepted, at the hearing of this originating summons, that the resolutions which were passed at those meetings in
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- November 2000 and April 2001 did not effect any change to the constitution of the company and that the existing constitution remained in the form adopted and approved at the meeting of April 2000. In these circumstances and in view of the declaration which I consider should be made to the effect that the valid constitution of Dancesport Australia Ltd is the constitution in the form adopted at the meeting of 15 April 2000, it is not necessary to make any orders or give any directions in relation to the purported resolutions of November 2000 or April 2001. Nevertheless, in order to regularise its records and to comply fully with the provisions of the Corporations Act and Regulations, it will be necessary for Dancesport Australia Ltd, if it has not already done so, to file the requisite notices with ASIC correcting the position wrongly asserted by the form dated 12 November 2002 and, instead, giving notice of the current valid constitution of the company as required.
Attempts to remedy the position
69 In April 2003, Mr V S Ioppolo, the eleventh defendant, arranged for the distribution to members of the company of a series of documents under cover of a letter of 11 April 2003 under the signature of Mr V R Bain, the third defendant, then occupying the role of President of Dancesport Australia Ltd. The documents so distributed are in the form of the Annexures PK 14 to PK 18 of the first plaintiff's affidavit of 26 May 2003 and comprise:
• a three page letter from Mr V R Bain, President, Dancesport Australia Ltd, dated 11 April 2003 addressed to "Fellow Dancesport Australia Members" regarding notice of motions to ratify National Council Actions and amend the constitution;
• attachment "A" - background information describing the establishment of Dancesport Australia and the incorporation of Dancesport Australia Ltd (four pages);
• attachment "B" - details of and explanations for amendments to the constitution of the company said to have been incorporated in March 2003 (three pages);
• a copy of the constitution of Dancesport Australia Ltd (Issue 3 - March 2003) - 46 pages;
• Dancesport Australia Ltd voting paper for special resolutions - National mail vote;
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- • a reply-paid envelope to contain the completed voting paper and addressed to DSA Returning Officer.
70 The special resolutions proposed in the voting paper, for which members had a choice of voting yes or no, were:
"1. that the members endorse and ratify all steps taken and decisions implemented by the Board of Dancesport Australia Ltd on and from 15 April 2000;
2. that the constitution dated March 2003 be adopted as the constitution of Dancesport Australia Ltd."
71 The materials accompanying the voting paper and the "March 2003 Constitution", included in prominent typeset, the following passage summarising the position of the directors of the company at that time:
"Please note that this is the key point of dispute by the complainants. Their claim is that persons completing application/registration forms prior to 15 April 2000 were accepted directly into membership of Dancesport Australia Ltd and therefore had a right to vote for the constitution as at 15 April 2000.
In support of their claims is the fact that the registration forms for the period commencing 1 July 1999 are in the name of the incorporated company, funds received for registrations were banked into the incorporated company's bank account and the June 1999 accounts of the incorporated company treat as income the funds banked on behalf of the unincorporated body.
Our counterclaim is that up until 15 April 2000, all registrants were first admitted as members of the unincorporated body Dancesport Australia but that their applications for membership of the incorporated body were not considered until after the new constitution was adopted on 15 April 2000.
Our claim is that the Directors of the incorporated body made a deliberate decision not to consider those applications for membership until the shelf company constitution was revised to what had been promised to the whole Dancesport fraternity.
It is our view that the 8 original members of the incorporated body were under no obligation to immediately accept
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- applications for membership of the incorporated body Dancesport Australia Ltd (and this is supported by the provisions of the shelf company constitution), but had until the end of the 1999/2000 financial year to first put in place all necessary steps to deliver the constitution that had been promised to potential future members back in 1997/98. This was achieved in April 2000 with 2½ months to spare to the June 2000 deadline."
72 This postal vote was conducted in the form described. The results of the ballot are set out in a letter from the defendants' solicitors to the plaintiffs' solicitors dated 25 June 2003 (Exhibit DFG 37 to the affidavit of Mr D F Gatley, sworn 4 July 2003), as follows:
"• 1,368 ballot papers were posted to members;
• 511 ballots were received by the close of polling;
• in relation to the first proposed special resolution, 450 votes were in favour, 54 votes were against and there were 3 invalid votes;
• in relation to the second proposed special resolution there were 455 votes in favour, 52 votes against, 3 invalid votes and 1 abstention."
73 The defendants now accept that, because of the absence of any provision in the constitution of the company to conduct a general meeting or pass a special resolution by postal vote, the outcome of this ballot does not effect any ratification of the prior conduct of the directors, nor approval of the proposed "March 2003 constitution". They submit, however, that it is, at least to some extent, indicative of substantial support by the members of the company for the position taken by the directors and for the proposals for ratification of their conduct and adoption of the proposed "March 2003 constitution".
74 The defendants also submit, and I accept, that if, as I have now held, the April 2000 constitution was validly adopted by the company, the remaining issues between the parties to this litigation concerning proposed ratification of the actions of directors and the adoption of further amendments to that constitution, are matters which the general membership of the company may address and resolve by a properly conducted procedure to determine the will of the company. In other words, there is no impediment to the general membership being able to
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- ratify the acts of the company and directors and to address the existing requirements for the constitution - Millar & Ors v Houghton Table Tennis & Sports Club Inc [2003] SASC 1 per Besanko J at [114] - [116], citing Foss v Harbottle (1843) 2 Hare 461; 67 ER 189; Cotter v National Union of Seamen [1929] 2 Ch 58; Edwards v Halliwell [1950] 2 All ER 1064; and Solicitor-General v Wylde (1945) 46 SR (NSW) 83. The defendants acknowledge, however, that if the issue is not one of mere irregularity in internal management but of an ultra vires act, then there is no room for the application of this rule and the court will pronounce upon the validity of the Act - Stevens v Keogh (1946) 72 CLR 1 per Latham CJ.
75 The defendants further submit that because of the capacity for the members of the company to resolve these issues internally by a duly conducted general meeting, the court should decline to intervene and give declaratory or other relief on these issues. I accept this submission that, in the present case, a duly convened and conducted general meeting of Dancesport Australia Ltd could consider, and if thought fit, approve the resolutions which had been proposed in the postal ballot, namely ratification of the prior acts of directors and adoption of a new constitution for the company and that these are essentially issues which should be left for the decision of the members of the company to determine upon their own collective judgment.
76 Nevertheless, in view of the absence of any provision for the conduct of a general meeting of the company or the passage of a special resolution of its members by postal ballot, I accept that the defendants have properly conceded that the results of the April/May postal ballot cannot be relied upon. The plaintiffs seek a permanent injunction restraining the defendants from relying upon those results and if I had been satisfied that there was any material risk that the defendants would seek to rely upon those results I would have been prepared to grant an injunction as sought. The fact of the position, however, is that the defendants have disavowed any reliance upon the results of the postal ballot and accept that they have not effected any ratification of the past conduct of the directors or of the company or any adoption of the proposed March 2003 constitution. They have tendered a formal undertaking to that effect. In those circumstances, it is unnecessary to grant any such injunction and for that reason I decline to do so.
77 The defendants' position remains that they desire, if possible, to obtain a special resolution of the members of the company in a duly convened general meeting to adopt changes to the existing constitution, including additional changes beyond those proposed in March 2003, and
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- to seek a special resolution ratifying their conduct. There is no reason, in my view, why the directors should not be permitted to propose such resolutions and it is obviously desirable such issues be left for determination by the members of the company internally. There are some practical problems confronting the defendants in conducting a general meeting because of the inability to conduct a postal ballot and because, contrary to the requirements of s 249X of the Corporations Act, the existing constitution does not provide for proxy voting. No issue was raised before me on this originating summons as to whether or not the members of the company could still, nevertheless, appoint a proxy or proxies to vote on their behalf at a duly convened general meeting and therefore I do not address that question and nothing in these reasons implies any conclusion on that issue: Harben v Phillips (1883) 23 Ch D 14 and NSW Henry George Foundation v Booth (2002) 54 NSWLR 433.
78 The defendants concede that their are other features of the April 2000 constitution of Dancesport Australia Ltd which need to be changed or supplemented in order to comply fully with the requirements of the Corporations Act - in particular, provisions relating to the ability of members of the company to vote by proxy at general meetings and provisions relating to the ascertainment of a necessary quorum at meetings. There were also some suggestions that other alterations to the constitution were desirable to render the administration of the national sport of dancing more efficient through the use of State branches and registries. If such changes are necessary or desirable then they can be made by the members of the company reaching decisions to that effect at properly conducted general meetings in accordance with the present constitution and all applicable laws. This is not the occasion to examine the extent to which, if at all, there is non-compliance in any respect between the existing constitution of Dancesport Australia Ltd and the Corporations Act because there have been no submissions that any alleged non-compliance affects the validity of acts done or decisions taken by a properly constituted board of the company in accordance with the constitution which I have held applies - namely, the constitution of April 2000.
79 In these circumstances, I consider that the relief which the court should grant should be a declaration to the effect that the April 2000 constitution of Dancesport Australia Ltd is and remains the valid and effective constitution of the company.
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