Lai v Tiao [No 2]
[2009] WASC 22 (S)
•12 FEBRUARY 2009
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CIVIL |
| CITATION | : | LAI -v- TIAO [No 2] [2009] WASC 22 (S) |
| CORAM | : JOHNSON J | ||
| HEARD |
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| DELIVERED |
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| SUPPLEMENTARY | |||
| DECISION |
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| FILE NO/S |
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| BETWEEN | : SHENG CHIN LAI |
Plaintiff
AND
CHENG CHIH TIAO
HUI PING WANGFirst Defendants
AUSTRALIAN CHINESE CONFUCIUS-MENCIUS
SAINT TAO CENTRE INCSecond Defendant
LEVEL HOLDINGS PTY LTD
Applicant for joinder
Catchwords:
Nil
[2009] WASC 22 (S)
Legislation:
Nil
Result:
Orders as attached
Category: C
Representation:
Counsel:
| Plaintiff | : | Mr K G Robson |
| First Defendants | : | Mr P G McGowan |
| Second Defendant | : | Mr P G McGowan |
| Applicant for joinder | : | Mr S D Pentony |
Solicitors:
| Plaintiff | : | Tan & Tan |
| First Defendants | : | Butcher Paull & Calder |
| Second Defendant | : | Butcher Paull & Calder |
| Applicant for joinder | : | Hotchkin Hanly |
Case(s) referred to in judgment(s):
Colgate-Palmolive Co v Cussons (1993) 46 FCR 225
Fazio v Fazio [2008] WASC 161
Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR
95
Glew v Frank Jasper Pty Ltd [2008] WASCA 186
Re Malley SM; Ex parte Gardner [2001] WASCA 83
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Unreported, Federal
Court, French J, 3 May 1991)
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 18 WAR 190
WA Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295
| JOHNSON J | [2009] WASC 22 (S) |
JOHNSON J: On 12 February 2009 the reasons for decision in the above matter were delivered. I indicated at the time that I proposed to hear from the parties as to the specific orders which would reflect the conclusions reached in those reasons.
2 Interim orders were made on that date for the first defendants to hand
over the keys to the Association's premises as well as to hand one to the Association's financial documentation. The matter was then adjourned to 6 March 2009. Unfortunately, there was a delay in compliance with the interim orders which, in my view, was not satisfactorily explained. It took the first defendants over a week to hand over the keys. The first defendants also chose to place an unjustifiably narrow construction on the scope of the financial documentation to be provided. The first defendant's protestation that the 'Management Accounts' are in evidence and that this fact is compliance with the interim orders is wholly without substance.
3 At the hearing on 6 March 2009 the court was advised that the keys
had been delivered up. The court was also provided with the assurance of counsel for the first defendants that he had explained to them in categorical terms the effect of the order and that the financial documentation was to be delivered to the plaintiff as soon as possible.
4 Prior to the hearing on 6 March 2009, the solicitors for the plaintiff
had filed a minute of proposed orders (the Minute) and submissions on the Minute. The approach adopted at the hearing was for submissions to be made on the Minute, first with respect to the eight proposed declarations and then with respect to the 21 orders sought by the plaintiff. In addressing those submissions and determining whether the declaration or order sought should be made, I propose to rely on the same abbreviations and general terms used in the reasons for decision.
5 On behalf of the plaintiff it was submitted that the declarations and
orders sought fall to be considered in the context of an extreme set of factual circumstances that require orders that correspond to that level of conduct. In making that submission, counsel referred to some of the specific findings made against the first-named first defendant, Tiao. In particular, counsel referred to the fact that Tiao had been found to have acted deliberately disgracefully at the general meeting of 26 February 2005, a meeting found to have been invalidly held. Tiao was also found to have treated the Association as his personal fiefdom and mixed the Association's funds with his own. In addition, counsel for the plaintiff referred to the fact that the second-named first defendant, Hui Ping Wang, openly contemplated acting in contempt of court. This is a reference to
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the suggestion made by Hui Ping Wang at the 16 July 2006 special general meeting that the Association pre-sell one of the developed blocks of land but have the title transferred to the buyer after the trial so as to avoid the effect of an injunction which restrained the sale of the land covered by the Level Holdings development contract. It was further submitted that the orders must be considered in light of the fact that the first defendants have already ignored the interim orders.
6 It is not entirely accurate to state that the first defendants ignored the
interim orders but it is certainly the case that there was an unexplained and unreasonable delay in handing over the key and an untenable position held by the first defendants in relation to the production of the financial records. In my view, the first defendants' assertions that the 'Management Accounts' were in evidence, and no further compliance with the interim order was therefore required, displays a reluctance to accept the outcome of the action as well as a cavalier approach to the orders of this court.
7 Keeping in mind the court's findings as to the extent to which the
first defendants were prepared to go to maintain control of the Association, the plaintiff's concerns about the conduct of the first defendants with respect to the future activities of the Association are legitimate. I accept that it will be necessary to ensure that the steps which now need to be taken by the Association to comply with its constitution are not impeded in any way by inappropriate conduct on the part of the first defendants. It will therefore sometimes be necessary for the orders to address specific conduct rather than simply rely on the fact that steps are to be taken in accordance with the constitution.
8 I propose to identify each proposed declaration and order before
setting out the submissions and conclusion in relation to each and then
separately identify the declarations and orders which are to be made.
Declarations
Declaration 1: All natural persons named in the List of Contributors compiled from a marble plaque displayed in the Temple belonging to the Australian Chinese Confucius-Mencius Saint Tao Centre Inc ('Association'), situated at Lot 42 Warton Road, Canning Vale, WA, being the persons named in the annexure in Chinese and its English translation to this order, are the only ordinary members of the Association ('Members').
Declaration 2: Sheng Chin Lai, Cheng Chih Tiao, Yung Sen Chou, Hui Pin Wang and Song Tyan Kuo are the only foundation members, and the only board members, of the Association.
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Declaration 3: Except as provided in declarations 1 and 2, there are no other members of the Association.
9 These three declarations deal with the membership of the
Association. Counsel for the defendants expressed no difficulty with the first two declarations which identify the ordinary membership, the foundation membership and the board members of the Association. Although counsel for the defendant took no objection to the third declaration, he did observe that it seemed tautological.
10 Counsel for the plaintiff submitted that the problem was that there
are other categories of members in the constitution and by way of example observed that it would be worrying if somebody claimed to be a supervisory member. Clause 6.5.2 of the constitution defines supervisors as ordinary members who are appointed by the board to oversee the operations of the board of directors. The powers of supervisors are not identified. Counsel submitted that this case is not an ordinary case and it needs to be pointed out with absolute clarity that no action may be taken to alter the membership in any way prior to the holding of a general meeting and the election of a new board of directors. Counsel for the plaintiff also expressed his concern that the first defendants have not accepted the thrust of the court's ruling and intend to carry on as they have always done, as evidenced by the first defendants' response to the interim orders. Counsel further referred to the finding that Tiao could actually understand English, contrary to his assertion, and noted that any explanation for non-compliance based on communication difficulties or a misunderstanding of the terms of any order ought to be viewed with caution.
11 It certainly is uncommon for unsuccessful litigants to take such an
approach although the level of acrimony in this matter may well explain
it, although certainly does not justify it.12 In the normal course of events, a declaration in the terms of the third
declaration would be unnecessary. However, in the circumstances of this case where there were attempts made to confer membership on others in order to increase the first defendants' support base and where the level of acrimony does not appear to have abated following the court's decision, out of an abundance of caution all three declarations will be made.
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Declaration 4: There was no Board Meeting of the Association held on 8
February 2005.
Declaration 5: The General Meeting held on 26 February 2005 was invalid.
Declaration 6: All resolutions passed by persons purporting to be office bearers or members of the Association are invalid and not binding on the Association including:-
| a. | general meetings held on 26 February 2005, 16 July 2006, 8 October 2006, 4 March 2007 and 14 October 2007; and |
| b. | board meetings held on 28 June 2006, 27 August 2006, and 12 February 2007. |
13 In relation to declaration 6, counsel for the plaintiff explained that,
although no specific findings were made in relation to the validity of these meetings, the fact of invalidity flows from the finding that no board meeting was held on 8 February 2005 and hence the 38 applicants whose membership was alleged to have been approved at that meeting were not members of the Association. It was apparent from the evidence that the attendees at the meetings referred to in declaration 6 were from that same group of applicants who were found not to be members. Consequently, the meetings were invalid as there was not a quorum of members.
14 Counsel for the defendants made no objection to declaration
although he considered that declarations 4 and 5 were incorporated in
declaration 6 and were, therefore, unnecessary.15 I have no difficulty with making declaration 5, in addition to
declaration 6 because the validity of the general meeting of 26 February 2005 and, consequently, the validity of the resolutions allegedly passed at that meeting, was one of the issues that was specifically requested to be addressed on the pleadings and in relation to which a declaration was sought. However, the finding that the boarding meeting of 8 February 2005 never occurred was simply a finding of fact in the course of determining the actual membership of the Association which was a matter central to the action. In my view it would not be appropriate to make a declaration with respect to a matter which is a simple finding of fact along the path of determining one of the primary issues involved in the litigation. Declarations 1 to 3 exclude from membership the applicants approved at the purported meeting of 8 February 2005.
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16 Although the history of the matter caused counsel for the plaintiff to
have some reservations about not making this particular finding as clear as possible, the reasons for excluding declaration 4 were ultimately accepted by him.
Declaration 7: Conal O'Toole, Solicitor and Butcher Paull & Calder, were not validly engaged as solicitors for the Association.
17 The actual declaration sought on the pleadings was that the purported
appointment by the first defendants of Conal O'Toole as the Association's solicitor was invalid. However, at trial, the defendants were represented by the firm of Butcher Paull & Calder. Counsel for the plaintiff explained that Mr O'Toole became a consultant or employee of Butcher Paull & Calder at an unidentified point in the proceedings. It is for those reasons that the declaration sought includes Butcher Paull & Calder.
18 On behalf of the defendant it was conceded that the content of this
declaration arose from the findings in the reasons for decision and no
objection was taken to it.
Declaration 8: The contract entered into between Level Holdings Pty Ltd and the Association dated 11 May 2004 in respect of the land being Lot 42 on Diagram 64776 in Certificate of Title 1660 Folio 668 ('Land'), including any subsequent contracts between Level Holdings Pty Ltd and any purchasers of any subdivided lots of Land ('Contracts'), is null and void.
19 An objection was taken on behalf of the defendants to declaration 8
which seeks a declaration that the Level Holdings contract is null and void. Counsel for the defendants submitted that it is not open to the court to make such a declaration because it was not within the purview of the issues raised on the pleadings in this action and could not be made in an action to which Level Holdings was not a party. It was, however, conceded that a declaration could be made that the first defendant was not authorised to enter into the Level Holdings contract because that issue is one which was squarely raised on the pleadings and was an issue between the parties to this action.
20 Counsel for the plaintiff advised that Level Holdings had applied to
be joined as a party but the application had been refused. However, Level Holdings has been notified of the reasons for decision and of the interim orders made.
21 In the plaintiff's written submissions on the minute, reference was
made to the determinations contained in the reasons for decision with
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respect to the questions raised by the pleadings. However, the only determination made in relation to the Level Holdings contract was that Tiao was not authorised by the board, or by the members of the Association, by retrospective ratification or otherwise, to enter into the Level Holdings contract.
22 In my view, the validity of the Level Holdings contract is an issue for
another court to decide. Answering the question of whether the contract is null and void requires a consideration of matters which were simply not addressed in the course of this action. In any event, it would be inappropriate to make a declaration with respect to the Level Holdings contract without hearing from Level Holdings. However, the declaration I am prepared to make, that Tiao was not authorised to enter into the Level Holdings contract, will have the effect of removing that issue from determination in any action brought by Level Holdings in relation to the contract.
Orders
Order (1): The plaintiff, Yung Sen Chou and the members do have immediate access to the property of the Association including the Temple situated at Lot 42 Warton Road, Canning Vale ('Property') and all financial records of the Association for the period from July 1996 to date.
23 Order 1 allows the plaintiff, Chou and the members of the
Association immediate access to the Association's property and also to all financial records of the Association. As I have noted, similar orders were in fact made at the time the reasons for decision were delivered. The order to hand over the key to the Association's premises was not promptly complied with. There was also a reluctance to comply with the order to hand over all financial records of the Association.
24 Counsel for the plaintiff relied on the first defendants' response to the
interim orders as highlighting their attitude to these proceedings and
justifying the need for a permanent order.25 Counsel also relied on Tiao's previous conduct in relation to a
general meeting called by Lai for 29 May 2005. Lai said in his evidence that he doubted the Association would organise a general meeting for 29 May 2005 as requested by him so decided to organise the meeting himself. As mentioned in the reasons for decision, three days prior to the meeting Tiao and Hui Ping Wang obtained an injunction restraining the holding of the meeting. For a number of reasons, including his understanding that some members had flown in from Taiwan for the
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general meeting, Lai decided instead to have a public meeting of the members of the Association on 29 May 2005. On the day of the public meeting, Tiao and his family members, and also Hui Ping Wang, stood outside the temple and handed out copies of the injunction. A security guard was also present and stood in front of the temple entrance. Lai said that he saw about 30 members leaving the temple grounds after seeing or speaking to Tiao, Hui Ping Wang and their associates.
26 Although counsel placed reliance on the fact that Taio prevented
people from exercising their lawful right to enter the premises, it is the case that Tiao had an injunction to prevent a general meeting from being held and had a lawful right to take steps to ensure the meeting did not take place.
27 In my view, that incident, of itself, is insufficient to justify an order
in the terms sought, particularly in circumstances where the keys to the premises have been handed over. In my view, that part of the proposed order dealing with access to the premises would be better worded if it stated that the persons identified 'are not to be denied access to property'. In my view, an order in those terms would overcome any concern raised by the first defendants' previous conduct.
28 At the time of the hearing the first defendants had not yet complied
with the interim order to produce all financial documents of the Association. It is also the case that, in view of the way in which the finances of the Association were dealt with, as referred to in the reasons for decision, there is always the possibility that relevant documentation may be identified even after the parties consider that the financial documentation has been handed over. In those circumstances I believe it would be prudent to include the financial documentation in the items to which the persons nominated are not to be denied access.
29 In the event that the court was minded to make an order of the type
contemplated in order 1, counsel for the first defendants agreed to the substituted wording. For these reasons I would make the order, amended in the above terms.
Order (2): The first defendants be and are permanently restrained from changing any locks at the property.
30 The justification for this order is said by the plaintiff to lie in the
evidence before the court that the first defendants had, in fact, previously changed the locks. To my recollection, no specific finding was made in the reasons for decision in relation to that allegation.
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31 Counsel for the defendants submitted that an order of this type was
simply not necessary. Nor, it was said, was it the sort of order which would typically be made in an action of this type. Notwithstanding the acrimonious nature of the dispute and the antagonism that has developed between the parties, in my view it is unnecessary to descend to this level of detail in the orders simply to prevent problems which the plaintiff envisages might arise. It is not the court's intention to micro-manage the conduct of individual board members arising from the findings made in the reasons for decision, or reacting against those findings.
32 It should be clear from the reasons for decision that the first
defendants are only board members until the members can meet and vote for a new board of directors. As such, they have no power to change locks or take any action that might prevent access to the Association's property by its members and other inaugural board members. If the first defendants were to take such action, the other board members would have the right to take any action with respect to the property, including calling for the assistance of the relevant authorities, to ensure they and the other members obtain the access to which they are entitled. Further, Lai or Chou, as members of the inaugural board until the election is held, would be quite entitled to force entry if someone changed the locks to the Association's property because changing the locks would not be an authorised act.
For these reasons I am not prepared to make an order in terms of the proposed order 2.
Order 3: The first Defendants be and are permanently restrained from permitting any persons, other than the members of the Association, to use or access the property.
34 Counsel for the plaintiff advised that the purpose of this order was to
prevent other people, who have no connection, relationship or potential relationship with the Association and its members, from wandering in and out of the Association's property. Counsel further explained that there was a need to prevent the first defendants from bringing in other people to intimidate the members from exercising their rights as members. It was submitted that the first defendants had permitted their relatives and friends to enter the property and had also permitted at least one other totally unrelated organisation to camp there. This was done without the authority of the members.
35 Counsel for the defendants submitted that this order ignores the fact
that the Association has a spiritual purpose to its operations. Counsel
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noted that the Association's property includes a temple and people, irrespective of whether they are actually members, may wish to access the temple and it may well be the desire of the membership that such people be allowed to access the temple. Further, it was submitted that members should be able to bring other people to the temple. As counsel has noted, not all activities are religious in nature and people should be able to bring non-members to other activities that take place at the Association's property. Counsel for the defendants expressed the view that it should be up to the newly elected board or the membership to determine whether they want to pass and enforce a rule that only members can access the Association's property.
36 I understand the concerns of the plaintiff which have led to an order
of this nature being sought. However, it is the case that the order sought would have a far wider effect than overcoming the conduct identified by counsel for the plaintiff. The potential effect of the order is to prevent perfectly legitimate people from being at the temple for spiritual or other purposes. For example, the order would prevent a member, even a board member, from bringing someone to the temple to show them around and invite them to seek membership of the Association.
37 I put to counsel for the plaintiff that, in view of the findings in the
reasons for decision, Lai, as a member of the inaugural board would be entitled to address the conduct identified by counsel by having those people removed from the property. Counsel's response was that, even as a board member, Lai had to come to court to stop such things from happening. I accept that Lai was required to bring legal proceedings in order to return control of the Association to the membership. Nevertheless, the plaintiff, who holds office as a member of the board only until the election of a new board, seeks a permanent order which has the potential to affect the future activities of the Association. In all the circumstances to which I have referred I am not prepared to burden the Association with such an order simply on the application of the plaintiff.
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Order 4: The first defendants do pay the plaintiff's costs of the action, including reserved costs, and such costs:-
| a. | are to include all costs except in so far as they are of an unreasonable amount or have been unreasonably incurred so that the plaintiff will be completely indemnified by the first defendants for his costs and the amount of such costs to be taxed; and |
| b. | to be paid by the first defendants forthwith. |
38 Counsel for the defendants conceded that there must be an order for
costs but resisted the claim for indemnity costs. Counsel also raised the issue of how costs can be paid forthwith if they are to be taxed. Presumably the intention is that the costs be paid immediately after taxation. However, because of the likely quantum of the costs I consider it appropriate to allow the first defendants one month to pay the taxed costs.
39 In submitting that an award of costs on an indemnity basis is justified
in the circumstances of this case, counsel for the plaintiff referred to and relied upon a number of findings and observations made in the reasons for decision. Specific reference is made to [562] of the reasons for decision which is in the following terms:
It is apparent that Tiao had no intention of allowing any issue raised by Lai to be objectively considered by the members. Nor was Tiao prepared to accept as members those people identified by Lai who were said to meet the criteria and wished to become members. I consider the refusal by Tiao to hold a meeting to which all interested persons were invited, with a view to resolving membership issues and identifying a way for the Association to move forward, was a direct result of his desire to maintain control over the Association. In my view, there is no other plausible conclusion which can be drawn in the circumstances which applied, particularly where his stance has resulted in significant legal costs. The steps taken by Lai with respect to membership were reasonable and, in my view, necessary, in order to correct the unfairness which arose from the failure by the board at the time that contributions were made to comply with the constitution with respect to approving membership. It was also necessary in order to overcome the unfairness which resulted from Tiao and Hui Ping Wang refusing to recognise any of the contributors as ordinary members of the Association.
40 Counsel for the plaintiff extracts from this paragraph the propositions
that the steps taken by the plaintiff were both reasonable and necessary and that the action should never have been opposed by the first defendants. From those basic propositions counsel then draws the
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conclusion that the first defendant's defence was an abuse of process and that, therefore, an order to pay indemnity costs is necessary. In my view, the conclusions drawn do not flow from the findings relied upon.
41 Counsel for the plaintiff also refers to what is described as 'a key
finding', which is that the first defendants should have submitted to the plaintiff's demands for a general meeting before the litigation commenced because the plaintiff's offer to hold a general meeting of all members could not have been rejected on any basis. It is further said that, had they done so, the litigation would never have occurred.
42 In making this submission, counsel for the plaintiff has turned
findings that Tiao did not behave in the way in which a reasonable person would have been expected to behave in the same circumstances, into a conclusion that the litigation should never have been defended. Further, he has turned observations based on findings, into findings of fact and afforded to them the same level of importance as the findings made in relation to the questions raised on the pleadings.
To these submissions, counsel for the plaintiff adds a series of further adverse findings made against Tiao:
1. that he was not a witness of truth: par 138; 2.
that he prepared totally inappropriate documents for meetings: par 558 559;
3.
that he had Kuo give evidence about a board meeting that never happened: par 418 - 443. I note that this alleged finding is a conclusion drawn by counsel for the plaintiff from the paragraphs to which he refers and was not a finding of fact made by the court;
4.
that he had other witnesses say they had been baptised before that was possible: par 476. Again, this alleged finding is a conclusion drawn from the paragraph and was not a finding of fact made by the court;
5.
that he had witnesses say they completed membership application forms before such forms existed: par 478. This alleged finding is not justified by the content of the paragraph; and
6.
that he had witnesses discuss and align their evidence before and even during the trial: par 485 - 489, 492. Although there was a finding that certain witnesses had discussed their evidence over
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lunch with Tiao and others, no statement or finding was made to the effect that Tiao 'had witnesses discuss and align their evidence'.
44 According to counsel for the plaintiff, this conduct can be
categorised as 'some element of improper or at least unreasonable conduct on the part of the parties' and relies on the decision in Glew v Frank Jasper Pty Ltd [2008] WASCA 186 [15] as authority for the proposition that conduct so categorised can attract an indemnity costs order as a mark of disapproval on the part of the court of that conduct. However, counsel overlooks the express requirement that the improper or unreasonable conduct must be 'in the conduct of the litigation' as opposed to being a description of the conduct which leads to the litigation.
45 It is also the case that only two of the alleged findings were in fact
made. One was a finding that Tiao was not a witness of truth and the other was that he prepared totally inappropriate documents for meetings where such conduct took place well prior to the litigation and not in the conduct of the litigation.
46 Indemnity costs are also said by counsel for the plaintiff to be
justified on an approach analogous to Order 24A. The plaintiff offered to do exactly what will now be ordered, that is, to call a general meeting for all members to decide the very matters in dispute: 574, 583. In fact, the plaintiff even suggested that the first defendants' purported members also attend. In making this submission counsel for the plaintiff again takes the approach that findings made by the court following trial lead inexorably to a conclusion that the litigation should never have been defended. However, such observations were dependent on findings as to credibility and on interim findings of fact. However, as counsel for the defendants points out, each of these finding were made after trial and, however adverse they may be to the first defendants, they do not necessarily lead to the conclusion that it was improper or inappropriate to defend the proceedings.
47 Indeed, the observation that the first defendants should have
submitted to the plaintiff's demands for a general meeting before the litigation commenced, is the key finding on which the plaintiff relies. The proposition submitted on behalf of the plaintiff is that, had the first defendants permitted that meeting to occur, the conflict would have been resolved and the litigation would never have occurred. Consequently, it is said, the first defendants' defence was an abuse of the process of the court.
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48 Counsel for the plaintiff maintains that the offer to settle the
proceedings, by holding a meeting attended by all members and alleged members, was eminently reasonable and in fact was what the court directed should happen. In fact, the issue raised on the pleadings which the court determined was whether Tiao was required to call a meeting of members as requested by the plaintiff. The determination was that, providing the 24-person who signed the draft notice of meeting were foundation members or members whose names appear on the marble plaque, then Tiao was required to call the meeting. A determination of the membership of the Associate was a necessary component of that determination. Whilst it would have been in the interests of the Association for the offer to have been accepted, if only to avoid the costs of litigation and hopefully, bring to an end conflict as to membership, it does not follow that a refusal of the offer constitutes an abuse of process or conduct justifying indemnity costs.
49 One clear reason why the first defendants were not obliged to accept
the plaintiff's offer is that it would not have legally resolved the issue of membership. There would still be an issue whether those people who were admitted to membership before the constitution was translated could lawfully vote at any meeting. Counsel maintained that Tiao did not suggest that the people on the plaque were not members until it was very late and litigation was in the offing. He then decided to start organising meetings and having friends and relatives apply for membership. In my view those matters are not an answer to the proposition that accepting the plaintiff's offer would not necessarily have prevented litigation from resulting. Further, however late in the day, it was still conduct which pre- dated the proceedings.
50 Another reason why acceptance of the plaintiff's offer would not
necessarily have precluded litigation is that it would not prevent another person from taking up the issue of the lawful membership of the Association and consequent voting rights.
51 Counsel for the plaintiff took the matter even further in submitting
that the key question of who are the members of the Association should never have been opposed. However, that was a central issue because, in accepting the contributors as members, the Board of the Association had acted contrary to the terms of the constitution and, if someone were to take issue with their membership, an order from the court was necessary as no record of the Association established their membership. As counsel himself submitted, the issue of membership was a very big part of the case. Until such time as the court made a finding about the Association's
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membership, that issue was in dispute and a number of disputes followed
on from that.52 To suggest, as I did, that it was clearly in the interests of the
Association to take all reasonable steps to reach an agreement which would move the association forward without the necessity of a trial, is a statement as to what a reasonable person in the position of the first defendants would have done, leaving legal issues to be answered on another occasion, if that occasion ever arose. However, as I have noted, it does not follow that taking legal action to positively determine membership is so unjustified as to result in an order for indemnity costs.
53 Counsel for the plaintiff also submitted that it is necessary to award
indemnity costs because the steps taken by the plaintiff were both reasonable and necessary. Counsel for the first defendants conceded there was a proper basis to conclude that the plaintiff's actions in bringing these proceedings were reasonable but submitted that it doesn't follow, as a result, that the defence of these proceedings by the defendants was unreasonable and they should be visited with indemnity costs. On my reading of the authorities, the fact that the litigation was reasonable and necessary is not criteria for an award of indemnity costs.
54 Counsel for the defendants submitted that none of the factual
findings adverse to the first defendants take away the fundamental issue which was agitated in the action which was the proper interpretation, application and construction of the constitution and the differing views which were advanced before the court as to who were properly members of the Association were primarily directed to that end. However, the other fundamental issue agitated in the action was the Level Holdings contract which, on the findings ultimately made, was not authorised by the Association prior to the contract being entered into, as Tiao well knew. Although I expressed considerable concerns about the translations prepared on behalf of the first defendants of the meetings where the Level Holdings contract was raised with the members, the documents did prima facie reflect a ratification of past action. Once again, the issue of the validity of the membership was central to this issue as well. Further, irrespective of the membership issue, it was not until the independent translations were obtained that it became evident that no such ratification had taken place.
55 Counsel for the defendants submitted that what the court found was
that the board, criticised as it was, waived the constitution and that, in a practical sense, had operated on the basis that the people on the plaque
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were the members of the Association. It was further submitted that these findings do not give rise to the conclusion that the arguments raised by the defendant as to the interpretation and construction of the constitution were unreasonable. I accept that to be the case.
56 Counsel for the defendants further submitted that the point of
distinction between the parties was that a finding of misconduct made at the conclusion of a trial says nothing about the conduct of the proceedings. In other words, according to counsel, the issues on which the plaintiff relies were issues which were live, which were there to be tested and findings adverse to the first defendants were made by the court. Because disputed issues were determined by the court adversely to the first defendants, does not mean that they were not matters incapable of being advanced before the court. Counsel for the defendants maintained that it was the court's detailed analysis of the evidence given by all the witnesses that, together with careful reasoning, led to the specific findings rather than, for example, a reference to an unqualified admission or a basis in the defendant's own position from which one could infer there never was, and never could be, an arguable defence. Counsel maintained that there was nothing in the conduct of the proceedings which would incur the wrath of indemnity costs.
57 One basis of concern with respect to the first defendants' position is
the finding that Tiao's refusal to hold a general meeting to which all interested persons were invited was a direct result of his desire to maintain control over the Association. Indeed, most of Tiao's conduct prior to commencement of the litigation was directed to maintaining control. However, in my view, that motivation does not undermine the arguments that legitimate issues were raised at trial which, if answered in Tiao's favour, could well have resulted in his conduct being validated and in him maintaining control over the organisation, at least on an interim basis until there was compliance with the provisions of the constitution as to the holding of meeting.
58 Before reaching a concluded opinion on whether it is appropriate to
order indemnity costs it is necessary to consider the authorities on the
issue.59 In Re Malley SM; Ex parte Gardner [2001] WASCA 83 [2] the court held that an award of costs on an indemnity basis will only be made in exceptional circumstances. Further, in the absence of a legal costs agreement under s 221 of the Legal Practice Act 2002 (WA), the recovery of costs can be no greater than the paying party has the obligation to pay
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his solicitor which is the amount identified in the scale. No submission was made on behalf of the plaintiff that a legal costs agreement was in place. In Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95 [19] Pullin J concluded that, where there is no costs agreement, there should not often be any need for an indemnity costs order.
60 In Flotilla Nominees Pty Ltd v Western Australian Land Authority Pullin J also succinctly stated the principles relating to indemnity costs orders as follows [8] – [9]:
The usual costs order is one for party and party costs. An order for indemnity costs will only be made if there is some special or unusual feature in the case to justify a departure from the ordinary practice. In effect, the court has jurisdiction to make an indemnity costs order whenever justice requires such an order. Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 18 WAR 190 at 191; Colgate- Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233. When the justice of the case does require such an order, then the court will have a discretion as to whether the order should be made.
Many examples can be found where an indemnity costs order has been made. Suffice it to say that most of these involve some element of improper, or at least unreasonable, conduct on the part of the parties or their legal advisors in relation to the case. See the examples given by Sheppard J in Colgate-Palmolive v Cussons (supra) at page 233 and the circumstances referred to in Fountain Selected Meats (Sales)Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 and in Unioil's case. Thus, the making of allegations of fraud knowing them to be false, or the commencement of proceedings for some ulterior motive, or in wilful disregard of known facts or the established law, or the making of allegations which ought never to have been made, or the undue prolongation of a case on groundless contentions, and even an unreasonable refusal to accept an offer of compromise, may lead to indemnity costs orders. See Colgate-Palmolive v Cussons (supra) at 233. The creation of false issues by tactical denials or failure to admit the facts may, in the circumstances of particular cases, lead to such an order: Unioil's case. An action commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success, may lead to such an order because such action might be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or the clearly established law: See Fountain Selected Meats (supra) [8] - [9].
61 It can be seen that some support can be found in the above extract for
the proposition put by counsel for the defendant that the improper, or at least unreasonable, conduct on the part of the first defendants must be in relation to the case.
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62 In Fazio v Fazio [2008] WASC 161 [16] Martin CJ observed that although the authorities establish that, in general, the discretion to award indemnity costs will not be exercised unless there is something in the conduct of the party against whom the order is sought that makes it appropriate for the court to take the unusual step of ordering costs. An example of such conduct was said by Martin CJ to be where the conduct of that party has been unreasonable; for example, where there is no substantive ground for opposition to a grant of probate in solemn form or where the unreasonable conduct has magnified the costs of proceedings or where there is something in the conduct of the party that merits censure or reproof or the defence or the claim has been pursued for some collateral or improper purpose.
63 In Fazio v Fazio the ground upon which the indemnity costs were sought was essentially that the conduct of the defendant was unreasonable because there was no clearly identified ground of opposition to the grant of probate. In that case, the grounds of opposition were found to be entirely without substance and an award of costs on an indemnity basis was made because the defendant's conduct was found to be unreasonable: [25]. That is not this case. In this case the arguments made on the proper construction of the constitution and the membership of the Association were perfectly reasonable despite the fact they did not ultimately find favour with the court.
64 In Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 18 WAR 190, 191 Ipp J observed that an order for indemnity costs will only be made if there is some special or unusual feature in the case to justify a departure from the ordinary practice and cited the decision of Sheppard J in Colgate-Palmolive Co v Cussons (1993) 46 FCR 225, 233. His Honour noted that the court has a wide discretion quoted French J's remark in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Unreported, Federal Court, French J, 3 May 1991) that: 'The categories in which the discretion may be exercised are not closed.'
65 In that case, Ipp J held (193 - 194) that the creation of false issues by
tactical denials, failures to admit contained in pleadings or a failure to make a bona fide attempt to agree facts may justify the ordering of payment of costs on an indemnity basis. This was said to be because, inherent in the case management system now in operation in the Supreme Court of Western Australia, is a general duty upon lawyers, in appropriate circumstances, to co-operate so as to avoid needless disputes. It was further noted that appropriate costs order could be made when the use of aggressive, discourteous and non-co-operative behaviour leads to the
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incurring of delay, inconvenience and costs. However, on an overall consideration of the issues in that case, Ipp J determined (192) that the facts did not warrant the making of a global order for indemnity costs.
66 In this case, despite having real concerns about the first defendants'
motives in defending this action, there were real legal issues involved in the case and the arguments put on behalf of the first defendants could not be said to be wholly without merit. Further, it is not the case that the action was unnecessarily prolonged by any conduct of the first defendants. The fact remains that most of the first defendants' inappropriate and improper conduct pre-dated the commencement of the litigation. The fact that I did not find the first defendants to be witnesses of truth would not justify an award of indemnity costs.
67 Whilst I have great sympathy for the plaintiff who was required to
commence litigation to establish the correct membership of the Association and hence establish the validity of certain meetings at which particular resolutions were passed, I am simply not satisfied that in defending the plaintiff's claim in the way that the first defendants did, their conduct was so improper or unreasonable as to warrant an order for indemnity costs.
Order 5: The First Defendants do pay the Plaintiff interest at 8% per annum, since the date of filing the writ of summons herein, on the taxed amount.
68 The plaintiff is seeking interest on the taxed amount of costs.
Counsel for the plaintiff accepts that the granting of this order stands or falls with the indemnity costs issue. The plaintiff submits that it is important to take into account the totally unwarranted strain on the plaintiff's finances caused by the first defendants' actions before and during the litigation. It is said that interest is justified as a mark of disapproval.
69 The plaintiff submits that, alternatively, the order can be justified
under s 37 of the Supreme Court Act which provides that the costs of and incidental to all proceedings in the Supreme Court shall be in the discretion of the court or judge and the court or judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent such costs are to be paid. Counsel relies on the decision in WA Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 [115] where the Court considered what is meant by costs and, in particular, whether the words costs was wide enough to include financing costs; that is, interest: at [114]. The Court also considered whether, if
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interest is incurred, whether it is 'incidental to proceedings in the Supreme Court' which is the wording used in s 37 of the Supreme Court Act: [115].
70 The Court held that, viewed in isolation, it was arguable that
financing costs incurred for the purpose of funding the conduct of a Supreme Court action are costs 'incidental' to the proceedings in the Supreme Court: [115]. However, the court also considered whether s 37 should be read down because of s 43 of the Supreme Court Act which expressly empowers the court to make awards of pre-judgment interest but does not apply to costs. The Court identified the issue for resolution as being whether a construction of s 37 that would enable the award of financing costs should prevail in light of s 32 which makes express provision for the circumstances in which the court may order pre-judgment interests. The preliminary view, expressed by McLure J (with whom Anderson and Steytler JJ agreed), was that, in the absence of a conflict between s 37 and s 32, there was no reason to read down s 37: [115]. My preliminary view is to the same effect.
71 McLure J considered it unnecessary to decide these questions,
expressing the view that, even if the court had the jurisdiction to award interest on costs incurred in conducting the action, she was not persuaded that the trial judge erred in the exercise of his discretion. The trial judge concluded that s 32 and s 37 of the Supreme Court Act do not authorise the court to award interest on costs and that it had no inherent jurisdiction to do so. The trial judge also concluded that even if he had the power to make such an award, he would not have exercised the discretion to do so because the progress of the case to trial was largely a mater within the respondent's control: [109]
72 On appeal, McLure J observed that it is currently the case that,
absent misconduct by a party, a successful litigant is not compensated for all costs directly incurred in the conduct of the proceedings and that there was nothing in the circumstances of the litigation that would justify the respondent receiving all of its direct costs much less its financing costs: [116].
73 It can be seen that, whilst the discussion in WA Planning Commission v Arcus Shopfitters Pty Ltd provides some support for construing s 37 as justifying an award of costs which includes interest, the actual decision does not decide the issue and reinforces the proposition that, absent misconduct, a successful litigant will not usually be compensated for all costs directly incurred.
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74 Counsel for the plaintiff accepts that the claim is absolutely unusual
and for the same reasons as have been given for refusing an award of
costs on an indemnity basis, I am not prepared to make the order sought.75 In the circumstances there is no need to address the fact that the civil
judgment interest rate is 6% and not the 8% sought on behalf of the
plaintiff.
Order 6: All monies paid by the Association to Conal O'Toole, Butcher Paull & Calder or Peter McGowan be repaid to the Association by the First Defendants, Conal O'Toole, Butcher Paull & Calder or Peter McGowan, jointly and severally, with interest at 8% per annum from the date of payment.
76 Counsel for the plaintiff advised that the plaintiff filed a challenge to
Mr O'Toole's supposed retainer very early in the litigation. The basis of the challenge was that there was no board resolution or other form of authority in existence justifying the engagement by Tiao of Mr O'Toole to act on behalf of the Association. Counsel noted that Mr O'Toole maintained that this was an issue to be determined at trial. However, no board resolution was ever put before the court to justify the retainer and the finding of the Court was that Tiao had no authority to engage a solicitor on behalf of the Association. According to counsel for the plaintiff, Mr O'Toole is now caught by the consequences of his decision not to sight a retainer before acting on behalf of the Association and of seeking a determination of the issue at trial. Counsel further noted that, even on the account given to Mr O'Toole by his client, Mr O Toole should have known that the proposition that Tiao was authorised couldn't be justified. According to counsel, a prudent solicitor would ask to see the resolution or other form of authority and would not simply take the word of one board member, particularly where that board member's word is hotly contested by another board member.
77 In seeking an order that the legal representatives repay all monies
paid to them from the Association's fund, the plaintiff also relies on the finding in the reasons for decision that a lawyer had drafted the key resolution purported to have been passed at the 26 February 2005 members' meeting. According to the plaintiff, this means the legal representatives were closely involved in the actions of the first defendants and can be ordered to refund Association money on that basis also. This submission overlooks the fact that whilst the finding is adverse to the first defendants, it is not necessarily adverse to the first defendants' solicitors.
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78 In the reasons for decision reference was made to a translation of the
minutes of the meeting of 26 February 2005 which was prepared by Tiao's son. That translation indicated that, at the meeting, a resolution was passed which ratified and confirmed all acts, actions, deeds, transaction and omissions of whatever nature of each and every person that has acted or purported to act for or on behalf of the Association. The effect of such a resolution would be to retrospectively ratify Tiao's actions in entering into the Level Holdings contract, irrespective of whether he was authorised at the time. However, an independent translation of the minutes obtained at the conclusion of the trial revealed that that the terms of the actual resolution passed was to ratify and confirm all past resolutions and projects such as the purchase of the land for building the centre. This resolution would not have ratified Tiao's actions.
79 Despite Tiao's denial, I found that the words contained in the
translation prepared by Tiao's son were far too close to a legally worded, all encompassing, ratification, and far too dissimilar to the actual resolution recorded, to have resulted from a poor attempt at translation; hence the conclusion that the wording must have been provided by a lawyer.
80 However, it does not follow from this finding that Mr O'Toole was
the solicitor who provided the appropriate form of words or, if he were, that he did so with a view to the preparation of a false or inaccurate translation. Actions of directors can quite properly be retrospectively ratified by members and if such a resolution had been passed by a properly called meeting of the actual members of the Association, informed of the relevant circumstances, then no issue could be taken with the resolution or the solicitor's advice on the appropriate terms of such a resolution. It can be seen that the finding does not adversely reflect on the conduct of Mr O'Toole.
81 In oral submissions, counsel for the plaintiff continued to press for an
order that the solicitor and counsel should be jointly and severably liable for the costs. This approach was said to be necessary until the plaintiff could be assured as to who received funds from the Association and the amount received by each person. It was further submitted that, if the interim order with regard to the Association's financial records had been complied with, the plaintiff would be in a far better position to make such a determination without having to ask for this order. Counsel noted that Mr O'Toole had failed to answer the plaintiff's demands for an explanation as to why the order relating to the Association's records has been ignored. Consequently, it was said that the plaintiff cannot be
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certain exactly how much of the Association's money has been paid to any particular person but added that it was clear, purely from the accounts in evidence, that over $70,000 has gone to the legal advisers.
82 Counsel submitted that the Association may not be able to recover
the monies paid out by Tiao and wished to preclude the necessity of an
action to recover monies owing to the Association.83 Having considered this particular submission, I am not prepared to
order that a party's legal representatives be jointly and severably liable for monies owed to the Association simply as a method of identifying the amount, and simplifying the means of obtaining repayment, of the Association's money which has been paid out without authorisation.
84 Another difficulty with the order sought is that part of the order
requiring that the barrister be jointly and severably liable. The inclusion of the barrister in that order misunderstands the nature of the relationship between the barrister and the client. The barrister is in fact engaged by the solicitor to appear as counsel on behalf of the client and is paid by the solicitor. Indeed, the barrister expects to be paid by the solicitor irrespective of whether the solicitor is put in funds by the client. For that reason alone, it would not be expected that the barrister would seek to sight an authorisation directed to the client to engage and pay for legal representation. Further, the fact that the order is for the barrister to be jointly and severably liable means that he would also be liable for monies paid to the solicitor which is money he never received. Counsel for the plaintiff agreed that it was not the usual practice for barristers to sight authorisation because his or her fees are to be paid by the solicitor. Counsel also conceded that the barrister is 'two steps removed' from any liability to repay the Association's money.
85 However, my preliminary view is that there is some substance to the
claim for the solicitor, Mr O'Toole, to repay to the Association the monies
received by him for legal services including money paid for counsel fees.86 In the more usual course of events solicitors must act upon the
account given to them by their client. If, before accepting instructions, solicitors were meant to make a subjective judgment about the truthfulness of the client or of the prospects of the action's success, certain people in the community would have little prospect of being represented. It also seems to me that the end result would be an entirely inappropriate impediment to a person enforcing his or her rights because of the
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likelihood that the solicitors of an unsuccessful party would be required to
disgorge the costs paid to them for their work.87 However, the preliminary view I have formed is based on the fact
that the issue of whether Mr Tiao was authorised to engage solicitors on behalf of the Association was one of the central issues at trial and was the subject of a specific finding that he was not so authorised. At trial no evidence was adduced to suggest that the first defendants were authorised to engage solicitors on behalf of the Association to defend the plaintiff's claim. Neither was there evidence of any authorisation for the first defendants to pay for their legal fees from Association funds.
88 In circumstances where Mr OToole was on notice with respect to the
issue of authorisation it cannot be said that he did not turn his mind to the issue. Clearly, either Mr O'Toole was advised that no such authorisation existed or his client failed to provide such authorisation. It was not a situation where it would have been reasonable to accept the word of either of the first defendants that authorisation existed. Either situation notified Mr O'Toole of the potential risks of continuing to act and accepting Association funds by way of payment.
89 Counsel for the first defendants submitted that there is no point in
principle articulated for an order of that kind. It was said that, if there were some persuasive point of principle sighted, then the court would be required to hold a factual inquiry to establish a basis upon which to make such an order. This is because, as counsel observed, the relevant facts do not establish a basis upon which to make such an order against him. I do not share that view because of the matters to which I have referred; the fact that Mr O'Toole was put on notice and the fact that one of the issues at trial which was determined in favour of the plaintiff was that no authorisation existed.
90 The final point raised by Mr McGowan was that, before making such
an order, Mr O'Toole would be entitled to be separately heard. It would seem from that statement that, although Mr McGowan addressed the issue of the liability for repayment of Association funds from Mr O'Toole, he was not briefed to also appear on his behalf. Further, it may be the case that Butcher Paull & Calder will wish to be heard in so far as their interests may differ from those of Mr O'Toole.
91 I have no difficulty in determining that it is appropriate for the first
defendants to repay to the Association all of the Association's funds paid to Mr O'Toole and Butcher Paull & Calder. However, because my
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tentative view is that there is a basis upon which to order the solicitors to disgorge the fees paid to them, I do not propose to make any order at this stage before hearing from Mr O'Toole and Butcher Paull & Calder.
Order 7: The first defendants and the Association, by themselves, their agents or servants or otherwise, be and are permanently restrained from giving effect to or further proceeding with the contracts.
92 Counsel for the defendants had no objection to this order providing
that the term 'contracts' is defined to relate only to the Level Holdings contract. In my view, there is ample justification for making such an order in relation to the Level Holdings contract.
Order 8: The First Defendants do indemnify the Association from any present or future claims by Level Holdings Pty Ltd against the Association.
Order 9: The first defendants do indemnify the Association from any present or future claims by persons who claim to have suffered any loss or damage as a result of the unauthorised actions of the first defendants or Level Holdings Pty Ltd, including, without limiting the generality of the foregoing, any persons who believe they are purchasers of any subdivided lot of the Land.
To a large extent, this issue was dealt with in relation to the request for a declaration in terms of declaration 8.
94 Counsel for the plaintiff submitted that there was no question the
Association was a victim in relation to the execution of the Level Holdings contract and no question that the contract was void. I have no difficulty with the first observation. However, for the reasons given in relation to the declaration which was sought by the plaintiff, I do not consider it appropriate in this context to make any observation, declaration or order on the validity of the Level Holdings contract.
95 Counsel for the plaintiff observed that, apart from the first
defendants, the representatives of Level Holdings are as much to blame as anybody for the situation whereby a prospective purchaser who has entered into an agreement to purchase one of the sub-divided lots has done so in circumstances where one party to the Level Holdings contract to develop the Association's land was not authorised to enter into that contract. The proposition put on behalf of the plaintiff was that there can be no other explanation but that Level Holdings knew Tiao was not authorised by the Association to enter into the Level Holdings contract.
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96 Counsel for the plaintiff also submitted that the Level Holdings
representative who attended court, and who was the only representative of the company involved in the execution of the contract, gave evidence in court and his evidence was completely unsatisfactory. However, the fact is that the representative did not give evidence. He simply produced documents under subpoena. Although I found a number of his responses to questions concerning the existence of documents to be implausible, he was not cross-examined.
97 Counsel for the defendant submitted that, until Level Holdings'
position emerges, crystallises and, in some respects, is determined, no such order should be made. Counsel pointed out that if Level Holdings decides to assert its position under the Level Holdings contract, the Association will necessarily be a party to such an action and an indemnity could be claimed from the first defendants at that time with an application being made to join them as a party. Alternatively, Level Holdings could decide to bring its action against both the Association and Tiao.
98 In response, counsel for the plaintiff noted that the Association
should not be required to pay to defend Level Holdings' claim again it, particularly in circumstances where any future claim could not contradict the finding in this action that Tiao was not authorised to enter in to the Level Holdings contract. Neither, according to counsel, should a charitable organisation such as the Association be required to meet the costs of filing third party notices. In taking this approach, counsel indicated that the plaintiff's only intention was to protect the Association. However, it is not always possible to protect an organisation against that which might transpire in the future, nor from the need to establish the right to an indemnity before receiving the benefit of it.
99 Notwithstanding the matters raised on behalf of the plaintiff, I
remain of the view that the validity of the Level Holdings contract is an issue for another court to decide should an action be commenced which addresses this specific issue.
Order 10: The First Defendants do restore the Land to its original condition as it stood prior to 11 May 2004 at their own costs.
100 The evidence of the witness Eric Archer given at trial was that by
21 January 2005, the development under the Level Holdings contract was almost 90% complete. It was also the case that there was no evidence of an intention on behalf of the Association to develop the land. Indeed, there was ample evidence of a clear intention on the part of those involved in the Association to use the balance of the land after the building of the
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temple for expansion of the temple's facilities. Various potential uses were discussed including aged care facilities, villas, a recreation centre, a library, an extension of the temple, retirement home, an amusement park for children, and for fruit and vegetable gardening.
101 However, the issue of what would happen to the land should the
plaintiff establish that the Level Holdings contract was executed without the authorisation of the Association, was simply not agitated at the trial of the plaintiff's action. There is no evidence before me of the intentions of the majority of the Association's membership arising from a finding that the Level Holdings contract was not authorised by the Association. On behalf of the plaintiff, reference was made to the public meeting arranged by the plaintiff and held on 29 May 2005 at which those who attended, including 52 of the first contributors, overwhelmingly rejected the sale of the land subject to the Level Holdings contract. However, the result of a questionnaire put to attendees at a public meeting does not equate to a resolution passed at a validly held meeting which establishes the Association's position with respect to a matter.
102 Counsel for the plaintiff submitted that Level Holdings had
trespassed on the Association's property by developing it, that the first defendants encouraged and permitted Level Holdings' trespass and the first defendants had never suggested they were not responsible for the trespass. It was further submitted that the plaintiff has always wanted the property brought back to its original condition
103 As to the latter point, the plaintiff does not speak for the Association
any more than Tiao does. The plaintiff donated the money to purchase the land and does not retain any rights in relation to the money, the land or the future use of the land. His opinion on the matter has no more force than that of any other member of the Association. Whilst I believe the plaintiff has the best of intentions, the separation between the plaintiff's interests and those of the Association must always be kept in mind.
104 An order of the type sought is properly one for the Association to
make and would be best made when there has been a meeting of members and a new board elected in accordance with the constitution. In no circumstances should an order of this type be made at the request of an inaugural board member who has already held his position well beyond that which was ever contemplated by the constitution.
105 Further, the financial position of the Association is currently not
completely known and, notwithstanding that the Level Holdings contract
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was entered into without authorisation, there remains the possibility that the Association might ultimately reach the conclusion that it needs to sell some of the land. In those circumstances, the development which has already occurred may facilitate that sale. Similarly, some of the future intended uses of the land to which I have already referred may be facilitated by some of the development of the land that has already taken place. In my view, it would not be appropriate to pre-empt whatever decision the members of the Association find it necessary to make.
106 Having conveyed to counsel for the plaintiff the court's preliminary
view on this issue, counsel indicated that the plaintiff would prefer for the order to be made with liberty to apply to set it aside if the Association does not wish to be bound by the order and determines to use the land in a way which would be facilitated by the development which has already taken place. However, the difficulty arises if, by the time the Association has met, elected a board, identified the financial position, and the membership has made a determination as to the future use of the land which requires some of the infrastructure which is currently in place, the land has already been restored to its original condition in accordance with the order. That is a position which is potentially adverse to the Association because it will then have to incur the cost of redeveloping the land to the necessary degree. In effect, such an order will foreclose the Association's options.
107 Whilst I accept that the Association should not have to bring another
action for the first defendants to right the wrong visited on the Association, the Association must be given the opportunity to determine what action is in its best interests. I have some reservations about granting liberty to apply generally. The history of this matter is such that there is a significant potential for the matter to be regularly returned to the court. However, in the circumstances to which I have referred, it would neither be appropriate for the order to be made before the Association is in a position to determine its best interests, nor should it be necessary for another action to be brought to ensure that Tiao rights the wrong he has inflicted on the Association in entering into the Level Holdings contract. I would, therefore, grant liberty to apply for an order of this type once the Association has held a general meeting, elected a board of directors, identified its financial position and passed a resolution at a validly convened general meeting which identifies the extent to which the development of the land under the Level Holdings contract needs to be reversed.
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Order 11: The Members' register of the Association is to be rectified in accordance with declarations 1 and 2 above.
108 Counsel for the plaintiff maintained that this issue was a key problem
in the action. However, it was the membership, not the absence of a membership register, which was the problem in the action. The issue of membership is properly addressed in the declarations.
109 The absence of a register was an issue with the Department of
Consumer and Employment Protection (DOCEP) and, in my view, rectification of the members register is an administrative matter. Once the board is elected a member's register should be created and it must include as a minimum the group of people identified in the plaque to which should be added any new members admitted after the election of the board of directors. Until then the plaque is the member's register.
I consider it unnecessary for the court to make the proposed order.
Order 12: A general meeting of the Association is to be convened to appoint a new board and is to be held within 60 days from the date of this order ('GM')
111 No specific opposition was made on behalf of the defendants to this
order although it was pointed out that, if this order were amended to insert after the word 'convened' the phrase 'in accordance with the terms of the constitution', some of the subsequent orders would not be necessary As the holding of an annual general meeting is fundamental if the Association is to move forward, the order will be made as sought and, for clarity and to obviate the need for further orders to the same effect, the order will be amended as indicated.
Order 13: All board positions of the Association are to be declared vacant upon the commencement of the GM.
Order 14: Notice of the GM to Members of the Association shall be given
14 days before it is held.
112 Counsel for the defendants maintains that orders 13 and 14 address
administrative and constitutional matters already prescribed by the constitution. That view is not entirely accurate. Under cl 8.5 of the constitution, all office bearers of the board of directors hold office for a period of three years and, unless re-elected, their positions shall be terminated at the conclusion of the annual general meeting at which an election is held. Therefore, any inaugural board member who is not
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re-elected ceases to become a board member at the end of the meeting and
not at the commencement, as the order requires.
Order 13 is indeed a replication of the requirement in cl 11.1 and cl 11.2.3 of the constitution.
114 I see no reason why the court should, by order, alter a requirement of
the constitution unless its application would impede the steps to be taken to ensure the Association continues to operate. In my view, a change from declaring board positions vacant at the commencement rather than the end of a general meeting would have no impact on the outcome of the meeting. It is, therefore, unnecessary to make the order sought.
Order 15: The plaintiff do take all necessary steps under the Association's constitution to convene, organise and chair the GM.
115 Counsel for the plaintiff submits that there is a need for caution in
allowing the first defendants any control of the Association's pending general meeting and elections. Counsel cites in support of that submission a number of the findings made in the reasons for decision which are adverse to the first defendants and one finding which is critical of those supporters of the first defendants who supported resolutions but forward by Tiao where little of the obviously necessary information or explanation had been provided. It was further submitted that none of Tiao's supporters should be permitted any role pending the elections. Counsel then referred to the findings with respect to the support obtained by the plaintiff from the attendees at the public meeting of 29 May 2005 and submitted that Tiao would be in a position of conflict if he were to act as chairperson or organise the general meeting. Counsel then submitted that the plaintiff had acted calmly under extreme provocation and could be trusted to act appropriately if he were to conduct the general meeting to be held.
116 Counsel for the defendants considered that this order has no purpose
given the order to be made under order 12 that the meeting is to be called and convened in accordance with the constitution. In the usual course of events, the role of organising a general or annual general meeting would fall to the board. Under cl 11.4.1 of the constitution, the director-general, if willing, presides as chairman and, if he or she is not available, then that position is offered in turn to the persons holding the positions set out in cl 8.1 until a person is found to chair the meeting.
117 Normally, I would not make orders addressing matters which are
already dealt with in the constitution. However, this Association currently
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has a dysfunctional board where the members of the board oppose each other and where the majority of the board have against them a finding of acting in their own interests, rather than the interests of the Association. In those circumstances, I can see the potential for problems arising. In order for the general meeting to be held in circumstances best suited for informed decision making, I consider the plaintiff is the more appropriate person to actually take the steps to organise the meeting. I am, therefore, prepared to make the order sought.
Order 16: No new members shall be admitted between the date of this order and the holding of the GM. For the avoidance of doubt, no persons purportedly admitted by the first defendants as members of the Association between 8 February 2005 and the GM are members.
118 Counsel for the plaintiff submitted that the first defendants'
behaviour in ignoring the interim orders alone warrants an assumption that they may admit more friends or relatives to membership and this justifies the making of this order. I do not consider that fact alone to provide the basis for making such an order. However, it is the case that the first defendants did purport to grant membership to their supporters in order to create their own power base and with a view to identifying those supporters as the only members of the organisation.
119 There are currently five surviving members of the inaugural board of
directors. As against three of them there is an adverse finding in relation to granting membership to their supporters. There is, therefore, a majority of the board, which has the power under the constitution to grant membership, who have shown themselves to be prepared to behave improperly with respect to granting membership. In my view, it would be inappropriate for those board members to now be able to further interfere with the membership of this organisation. In particular, it would not be appropriate for new members to be admitted at this point before the changes envisaged in the reasons for decision can be put into effect by the current members.
120 Out of an abundance of caution I am prepared to make the order that
no new members shall be admitted between the date of this order and the holding of the general meeting. However, I am not prepared to include in that order the concluding proposition that, for the avoidance of doubt, no persons purportedly admitted by the first defendants as members of the Association between 8 February 2005 and the general meeting are members. That proposition is, in any event, covered by declarations 1 to 3.
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Order 17: The first defendants be and are permanently restrained from creating any disturbance or acting in any intimidating way, prior to, at or after the GM towards the plaintiff, members of the Association and/or their families.
121 Matters of this nature should, in the usual course of events, be dealt
with by the use of common sense, rather than orders of the court. When people behave in such a fashion, it is best left to the general law to deal with the individual's conduct. The person acting as chairperson of the meeting is entitled to take appropriate action to prevent disruption of a general meeting and I consider that in almost all circumstances the court should not descend to this level of control over the situations which might confront the Association and any newly elected board. However, because of the history of this case, I can understand that there might be some concern that the members of the Association will be in some way impeded from properly dealing at general meeting with the issues which have arisen and have been addressed in the reasons for decision.
122 For that reason, counsel for the first defendants was asked to advise
whether it was his clients' intention to continue their involvement with the Association, in the absence of which there would be no reason to expect problems of the nature described in the order. The advice received was that they did so intend. Counsel for the plaintiff was then asked to identify the evidence which is said to establish a concern that the first defendants would create a disturbance or act in an intimidating way. The evidence was said to be the incident referred to herein in relation to order 1 where, on the day of a public meeting organised by the plaintiff, Tiao and his family members, and also Hui Ping Wang, stood outside the temple and handed out copies of an injunction obtained to stop the meeting being held as a general meeting. A security guard was also present and stood in front of the temple entrance. Lai said that he saw about 30 members leaving the temple grounds after seeing or speaking to Tiao, Hui Ping Wang and their associates.
123 As I observed in relation to order 1, in the situation to which I have
just referred, Tiao had an injunction to prevent a general meeting from being held and had a lawful right to take steps to ensure the meeting did not take place. Acting in that way, at that time, does not necessarily lead to a conclusion that the first defendants would behave in an intimidating manner in relation to a properly convened general meeting, although some support for such a conclusion can be found in the numerous adverse findings I have made with respect to the first defendants' conduct in ensuring their control of the Association continued. However, whilst that
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conduct reinforces the plaintiff's position, in my view it does not justify
making the order sought.124 Counsel for the plaintiff also relied on the conduct of Tiao with
respect to the 14 October 2007 annual general meeting where Tiao produced to the meeting a document entitled 'Lai's Lies'. This was a document, unsupported by any evidence to suggest its contents were accurate, which was said to establish that Lai had made false statements in the course of this legal action. The conclusion I drew was that it was entirely inappropriate for the issues contained in the document to be raised in that forum, in particular because some of the allegations bore no connection to the issues in the litigation and had no relevance to the Association. Another document produced and disseminated by Tiao was entitled 'Personal Attacks On the Temple and Its Staff'. The purport of this document was to the effect that the questioning of Tiao and Hui Ping Wang by Lai was not only inappropriate but amounted to a personal attack on the temple and its staff. The observation made in the reasons for decision was that the documents did not reflect well on Tiao. Further, the conclusion drawn was that the document had the undesirable potential to influence the members to refrain from questioning the conduct of those involved in the management of the Association.
125 However, whilst the first defendants would need to be very careful
not to make statements that are contrary to the findings made by the court in the judgment, even if the first defendants were restrained from creating a disturbance and acting in an intimidating way that would not necessarily prevent behaviour such as putting forward documents of this type.
126 Counsel for the plaintiff pointed out that the plaintiff was simply
trying to ensure that a free and fair election takes place. I accept that to be the case. Further, based on the way in which the first defendants have conducted themselves in the past, particularly in relation to the documents that were put forward at the 14 October 2007 meeting, I understand the plaintiff's concern about the way in which the first defendants will behave at the meeting which is to take place. I have no difficulty with the first defendants properly putting forward their views as members of the association in so far as those views are accurate and truthful, but it is vitally important that personal animosities and inappropriate behaviour do not impede the meeting or the election of board members which is to occur at the meeting.
127 Counsel for the defendants submitted that the factual material
advanced by the plaintiff in support of the order did not provide a basis
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for granting such an order. However, counsel submitted that it might be appropriate for an undertaking to be given by both the plaintiff and the first defendants to the effect that they will not create a disturbance or act in any intimidating way at the meeting. Counsel for the plaintiff indicated that an undertaking would be an acceptable substitute for the order sought.
128 Since this matter was heard, the court has been provided by the
respective undertakings which are, unfortunately, not in exactly the same terms. The precise terms will be addressed before this group of orders are made as it is the giving of the undertaking which is the reason I have declined to make any order addressing this issue.
Order 18: The First Defendants be and are permanently restrained from operating or opening any bank accounts of the Association.
On behalf of the plaintiff reference was made to the following conduct of the first defendants in relation to the Association's funds:
(i) That Tiao mixed his funds with the Association's funds held in trust; (ii) That the first defendants' brazenly opened, operated and closed Association bank accounts at will, despite the express requirement of the constitution that operation of the Association's financial accounts required three signatures and further that, unless restrained, there is a real risk they will do so again; (iii) Tiao intended to reimburse himself from the proceeds of sale of the Association's land, a sum of money which he maintains he spent from his personal funds to meet Association expenses but without having to establish his legal entitlement to be so reimbursed;. 130 The position put before the court on behalf of the plaintiff was that
neither the first defendants, their friends nor relatives should hold any financial position in the Association and they should not be involved with the Association accounts. Although I have concerns about the glaring lack of independence and objectivity in decisions made by a number of the first defendants' supporters, the evidence does not support a finding that they should not be eligible for election to the board of an incorporated association. To the contrary, in my view, there is a wealth of evidence which supports a conclusion that the first defendants are not suitable to hold such a position with the Association or to be responsible for Association's funds. Their past conduct illustrates their unsuitability for
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any future or further involvement of that type with the Association. However, ultimately, such a decision is for the members of the Association to make and not for the court to impose of them.
131 Counsel for the defendants touches on this issue in a limited way in
making the observation that, in the event that the outcome of the meeting leads to one or both of the first defendants being given a position requiring or permitting access to Association funds, such an order would be problematic. As counsel observed, it is for the members to determine who becomes a board member and for the board then, in light of the clear findings, to turn this into a functional operating association. In such circumstances a permanent bar of the type sought would cause problems.
132 For these reasons I am prepared to restrain the first defendants from
operating or opening any bank accounts of the Association until the conclusion of the general meeting at which the new board is elected. Further, because of the fact that Association funds have in the past been kept in private accounts, the order needs to be extended to any bank account holding Association funds. In that way it should be perfectly clear to the first defendants that they are not entitled to touch any Association funds and will be liable for the consequences if they do so. However, the time period for which this order operates will be only until the conclusion of the general meeting and the election of a new board of directors.
Order 19: Should the first defendants, after the date of this order, fail to obey any of the orders contained herein, the first defendants do stand committed to prison for the period of [_____] for their contempt.
133 In support of this order, counsel for the plaintiff again referred to the
first defendants' failure to comply with the initial orders in a timely fashion and submitted that the refusal to obey those orders was a serious matter. It was suggested that it would assist the first defendants to concentrate their minds on the significance of orders of the court to make an order that they stand committed to prison for failing to obey them. I have no doubt that an order that the first defendants stand committed for contempt if they fail to comply with any of these orders would concentrate their minds on the obeying the orders. The more interesting issue is that raised by counsel for the first defendants which is whether a contempt order is appropriate or necessary. In my view, it is not and ultimately the plaintiff did not press this order.
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Order 20: The costs of the hearing on 6 March 2009 be included and taxed within order 4.
134 No difficulty was expressed with the order unless the costs are
indemnity costs. As there is no award of indemnity costs the order will
be made.
Order 21: Liberty to apply with 48 hours' notice.
135 For the reasons referred to in relation to order 10 and other than with
respect to order 10, there will be liberty to apply within 48 hours until the
meeting referred to in order 12 has been held and a new board elected.
IN THE SUPREME COURT OF WESTERN AUSTRALIA CIV 1442 of 2005
IN THE MATTER OF AUSTRALIAN CHINESE CONFUCIUS-MENCIUS SAINT
TAO CENTRE INC
BETWEEN
| Sheng Chin Lai | Plaintiff |
| and | |
| Cheng Chih Tiao and Hui Pin Wang | First Defendants |
| and | |
| Australian Chinese Confucius-Mencius Saint Tao Centre Inc | Second Defendant |
_____________________________________________________________________________
ORDERS MADE 22 May 2009
_____________________________________________________________________________
Dated and entered the 22nd day of May 2009.
This action having been tried from 16 to 20 November, 23 November, 26 November 2007 and 22 February 2008 before the Honourable Justice Johnson in the presence of Mr K G Robson of counsel and Mr RWH Tan for the Plaintiff and Mr P McGowan of counsel for the First and Second Defendants delivered reasons for decision.
IT IS DECLARED THAT:-
1. All natural persons named in the List of Contributors compiled from a marble plaque displayed in the Temple belonging to the Australian Chinese Confucius-Mencius Saint Tao Centre Inc ("Association"), situated at Lot 42 Warton Road, Canning Vale, WA, being the persons named in the annexure in Chinese and its English translation to this order, are the only ordinary members of the Association ("Members").
2. Sheng Chin Lai, Cheng Chih Tiao, Yung Sen Chou, Hui Pin Wang and Song Tyan Kuo are the only foundation members, and the only board members, of the Association.
3. Except as provided in declarations 1 and 2, there are no other members of the Association.
4. The General Meeting held on 26 February 2005 was invalid.
5. All resolutions passed by persons purporting to be office bearers or members of the Association are invalid and not binding on the Association including:-
a.
general meetings held on 26 February 2005, 16 July 2006, 8 October 2006, 4 March 2007 and 14 October 2007; and
b. board meetings held on 28 June 2006, 27 August 2006, and 12 February 2007. 6. Conal O'Toole, Solicitor, and Butcher Paull & Calder, were not validly engaged as solicitors for the Association.
7. Cheng Chih Tiao was not authorized by the Board or by the members of the Association to enter into the contract between Level Holdings Pty Ltd and the Association dated 11 May 2004 (the Level Holdings contract) in respect of the land being Lot 42 on Diagram 64776 in Certificate of Title 1660 Folio 668 ("Land").
The plaintiff and the first defendants having given an undertaking to refrain from creating any disturbance or acting in any intimidating way, prior to, at or after the general meeting towards the plaintiff, members of the Association, and/or their families
IT IS ADJUDGED AND ORDERED THAT:-
1. There be judgment for the plaintiff.
2. The Plaintiff, Yung Sen Chou and the Members are not to be denied access to the property of the Association, including the Temple situated at Lot 42 Warton Road, Canning Vale ("Property") and to all financial records of the Association.
3. The First Defendants do pay the Plaintiff's costs of the action, including reserved costs, to be taxed if not agreed and paid by the First Defendants within one month from the date of taxation or agreement.
4. The First Defendants and Song Tyan Kuo be and are permanently restrained from giving effect to or further proceeding with the Level Holdings contract.
5 Once the Association has held a General Meeting, elected a board of directors, identified its financial position and passed a resolution at a validly convened general meeting which identifies the extent to which the development of the land under the Level Holdings contract needs to be reversed, there be liberty to apply for an order that the First Defendants do restore the Land to its original condition as it stood prior to 11 May 2004 at their own costs.
| 11. |
6. A General Meeting of the Association is to be convened in accordance with the terms of the constitution to appoint a new board and is to be held within 60 days from the date of this order.
7. The plaintiff is to take all necessary steps under the Association's Constitution to convene, organise and chair the general meeting referred to in order 5.
8. No new members shall be admitted to the Association between the date of this order and the holding of the general meeting.
9. The first defendants be and are restrained from operating or opening any bank accounts of the Association or any bank account in which funds of the Association are held until the conclusion of the general meeting referred to in order 6.
10. The first defendants pay the plaintiff's costs of the hearing on 6 March 2009 and 22 May 2009, to be taxed if not agreed.
All monies paid by the Association to Conal O'Toole, Butcher Paull & Calder or Peter jointly and severally within one month with interest at 6% payable from 22 June 2009.
12. Liberty to apply with 48 hours' notice until such time as the general meeting referred to in order 6 has been held and a new board elected.
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