Lianos v Order of AHEPA NSW Inc (No 2)

[2020] NSWCA 304

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Lianos v Order of AHEPA NSW Inc (No 2) [2020] NSWCA 304

Hearing dates:

On the papers (submissions 21 October 2020)

Date of orders:

26 November 2020

Decision date:

26 November 2020

Before:

Macfarlan JA at [1];
Meagher JA at [2];
Emmett AJA at [3]

Decision:

1.   Leave is granted to proceed under Corporations Act 2001 (Cth), s 440D(1)(b).

2.   Appeal allowed.

3.   Set aside orders made by the primary judge on 3 October 2019 and, in lieu thereof:

a.   Declare that, on and from the registration of the 2005 resolutions, the 2007 resolutions, and the 2010 resolutions in accordance with the orders of Black J made on 21 March 2018 in proceeding number 2016/380711 in the Supreme Court of New South Wales (Registration Date), the references in clauses 1(2)(f), 2(1)-(3), 3(1), 4(1), 5(1)(d), 14, and 15 of the Rules of the first respondent (Association) to the “unincorporated association” has been and is a reference to AHEPA Australia Limited ACN 620 348 923 (AHEPA Australia), being the successor to the unincorporated association previously known as the “Australian Hellenic Educational Progressive Association”.

b.   Declare that, on and from the Registration Date, in order to become a member of the Association who is entitled to vote at any general meeting of the members of the Association, a person must have been a financial member of a Chapter (or Unit) of AHEPA Australia that is geographically situated in New South Wales on the 30th of June of the last financial year, such membership to have occurred in accordance with Part X of the By-Laws of AHEPA Australia, as promulgated by the National Convention pursuant to clause 2 of Part X of the Constitution of AHEPA Australia.

c.   Declare that the resolutions purported to be passed at the special general meeting of the Association held on 13 November 2018 are invalid and that the proceedings at that meeting were void.

d. Order that the second respondent rectify the Register of Incorporated Associations maintained under s 98 of the Associations Incorporation Act 2009 (NSW) by removing the purported constitution of the Association registered on or about 18 December 2018 from the Register.

e.   Declare that the resolution (described as a “motion”) referred to in the notice of general meeting dated 11 February 2019 signed by Bill Skandalakis and Panayiotis Diamadis, circulated to certain members of the Association, and subsequently purported to be declared carried at a general meeting of the Association on 28 February 2019, in the following terms, is invalid and of no effect:

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

f.   Declare that between 1 December 2018 and 15 March 2019, the Association did not validly appoint any person to occupy the office of Secretary or Treasurer of the Committee of Management of the Association.

4.   The first respondent to pay the appellants’ costs of the appeal.

5.   The first respondent to pay the appellants’ costs in the court below.

6.   The above orders be stayed for a period of 21 days.

Catchwords:

CORPORATIONS — voluntary administration — Legal proceedings — moratorium on legal proceedings against company under administration — administrators appointed after publication of reasons but before final orders made — section 440D Corporations Act 2001 (Cth) — whether making orders a step in proceedings requiring leave — application for leave under s 440D — whether proposed orders of successful appellant reflect reasons given for appeal

Legislation Cited:

Associations Incorporation Act 2009 (NSW) ss 96, 97

Associations Incorporation Regulation 2016 (NSW), reg 18

Corporations Act 2001 (Cth), Pt 5.3A, ss 435A, 436A, 440D, 444E, 471B

High Court Rules 2004 (Cth), r 41.02.2

Cases Cited:

Akins v National Australia Bank (1994) 34 NSWLR 155

Foxcroft v Ink Group Pty Ltd (1994) 15 ACSR 203

In the matter of Order of AHEPA NSW Incorporated [2018] NSWSC 458

Larkden Pty Limited v Lloyd Energy Systems Pty Limited [2001] NSWSC 1305; 285 ALR 207

Lianos v Order of AHEPA NSW Inc [2020] NSWCA193

Sovereign MF Limited v Compliance and Risk Services Pty Ltd [2013] VSC 213

Unilever Australia Limited v Rosella Foods Pty Limited [2012] NSWDC 221; 15 DCLR (NSW) 185

X Pty Ltd (Admin App) v Milstead [2015] FamCAFC 50; 54 Fam LR 443

Category:

Procedural and other rulings

Parties:

George Lianos (First Appellant)
Con Gouros (Second Appellant)
Luke Kyprios (Third Appellant)
Order of AHEPA NSW Inc (First Respondent)
NSW Commissioner for Fair Trading (Second Respondent, submitting appearance)

Representation:

Counsel:
M Ashhurst SC with D Meyerowitz-Katz (Appellants)

Solicitors:
McCabe Curwood (Appellants)
Tzovaras Legal (Theophilus Premetis and Panayiotis Diamadis, Intervenors)
Legal Services, Department of Customer Service (Second Respondent)
Pure Legal (the members and executive committees of the Eight Chapters)

File Number(s):

2019/335705

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Corporations List

Citation:

[2019] NSWSC 1329

Date of Decision:

3 October 2019

Before:

Rees J

File Number(s):

2019/25650

Judgment

1. MACFARLAN JA: I agree with Emmett AJA.

2. MEAGHER JA: I agree with Emmett AJA.

3. EMMETT AJA:

Introduction

These proceedings are concerned with the affairs of Order of AHEPA NSW Inc (the Association). On 26 August 2020, the Court published its reasons (the Principal Reasons)1 for concluding that the appeal brought by Mr George Lianos, Mr Con Gouros and Mr Luke Kyprios (the Dissenting Members) should be allowed and the orders made in proceedings in the Equity Division should be set aside. In these reasons, terms are used in the way they were defined in the Principal Reasons.

4. The Dissenting Members were directed to bring in short minutes of orders to be made in lieu of the orders made by the primary judge. On 8 September 2020, in accordance with those directions, the solicitors acting for the Dissenting Members provided proposed orders to the Court and the Association’s then solicitors. On the same day, the solicitors then acting for the Association sent an email objecting to the proposed orders and seeking to have the proceedings relisted. Several questions have now arisen concerning the making of orders. The questions arise in the context of the subsequent entry of the Association into voluntary administration.

The Appointment of the Administrators

5. At a meeting of the Committee of Management of the Association held on 8 September 2020, the financial position and solvency of the Association was discussed and resolutions were passed as follows:

1. that in the opinion of the directors or Committee of Management members, the Association is insolvent, or is likely to become insolvent at some future time; and

2. that administrators of the Association should be appointed.

The chair of the meeting then tabled a consent signed by Mr Michael Hird and Mr Alan Walker, both of Cor Cordis (the Administrators), to act as administrators of the Association. A resolution was then passed that the Administrators be appointed as administrators of the Association and that an instrument of appointment be executed by the Association. An instrument of appointment of the Administrators as administrators of the Association, in accordance with s 436A of the Corporations Act 2001 (Cth), (the Corporations Act), was then executed on behalf of the Association.

6. On 14 September 2020, unaware of those circumstances, the Court gave directions as follows:

1. Direct the Association to file and serve submissions as to why the orders proposed by the Dissenting Members do not reflect the Court’s reasons for judgment and what amendments should be made, with reasons, no later than Wednesday 16 September 2020.

2. Direct the Dissenting Members to file and serve submissions in response no later than Friday 18 September 2020.

3. Direct the Association to file any reply no later than Tuesday 22 September 2020.

The Court noted that orders would be made on the basis of those submissions. On the same day, the solicitors for the Dissenting Members wrote to the Administrators asking them whether, as voluntary administrators of the Association, any issues were taken with the orders proposed on behalf of the Dissenting Members.

7. On 15 September 2020, solicitors acting for the Administrators wrote to the solicitors acting for the Dissenting Members and the solicitors acting for the Association, drawing attention to s 440D of the Corporations Act. By that provision, as applied to the Association by ss 96 and 97 of the 2009 Associations Act and reg 18 of the Associations Incorporation Regulation 2016 (NSW), a proceeding in a court against an incorporated association cannot proceed without the Administrators’ written consent or leave of the Court. Later on 15 September 2020, the solicitors for the Administrators sent an email to the Court asserting that s 440D of the Corporations Act applies to the proceedings. On 16 September 2020, the Court, having been informed of the appointment of the Administrators, ordered that the directions given on 14 September 2020 be stayed until further order.

8. On 16 September 2020, the solicitors for the Dissenting Members requested the solicitors for the Administrators to advise whether the Administrators would provide their written consent pursuant to s 440D of the Corporations Act to give effect to the Principal Reasons. The solicitors for the Administrators responded on 17 September 2020, saying that they were still in the process of obtaining instructions and were not in a position to respond to the requests made on behalf of the Dissenting Members that they provide their written consent pursuant to s 440D. The solicitors said that the Administrators would admit the Dissenting Members to prove as creditors of the Association, for voting purposes, should they seek to do so, at the first meeting of creditors scheduled for 11 am on 18 September 2020.

9. The first meeting of creditors of the Association was held on 18 September 2020 and the Dissenting Members were represented by proxy. The appointment of the Administrators was not challenged at the meeting. No committee of inspection was appointed by the creditors at the meeting.

10. On 22 September 2020, the solicitors for the Administrators wrote to the solicitors for the Dissenting Members saying that, in the limited time available, the Administrators had not been able to reach a concluded view about the assertion made on behalf of the Dissenting Members that the orders proposed would not impact significantly on the conduct of the administration and would have little relevance for the creditors of the Association. The solicitors said that, if the proposed orders might have some impact, significant or otherwise, on the conduct of the administration, or would have some relevance, little or otherwise, for creditors, the statutory moratorium should not be disturbed.

11. The Administrators’ solicitors confirmed that the Administrators did not envisage the absence of final orders as a basis for resisting any attempt by the Dissenting Members to submit a proof of debt in the usual way and that they had been admitted as creditors to prove, for voting purposes, at the first meeting of creditors. The solicitors said that, in the circumstances, they did not see any need for the making of final orders and did not see how obtaining orders would make any practical difference to the Dissenting Members in the context of the administration. Further, the solicitors said, the Administrators did not see any compelling reason why they should exercise their powers to provide consent under s 440D and, accordingly, the Administrators declined to do so. They said that, if the Dissenting Members intended to make an urgent application for leave pursuant to s 440D of the Corporations Act, they did not expect that the Administrators would oppose that application.

12. Under cover of a letter dated 7 October 2020, the Administrators circulated to the creditors of the Association a notice of the second meeting of creditors to be held on 14 October 2020, together with the Administrators’ first report to creditors (the Report). In the Report, the Administrators said that they had been liaising with the Association’s “various stakeholders” concerning “the potential proposal of a [Deed of Company Arrangement (DOCA)] and restructuring plan for the consideration of the Association’s creditors”. The Administrators said that the Association had a surplus of assets over liabilities of between $9 million and $15 million but that, as a result of legal fees and the limitations of the powers of the Committee of Management to sell assets to meet the Association’s liabilities, the Administrators had been appointed.

13. The Administrators said in the Report that they had received a DOCA proposal that would provide a return of 100 cents in the dollar to unsecured creditors in correspondence dated 6 October 2020 but had not had sufficient time to assess the proposal for the purposes of providing a recommendation to the Association’s creditors. They also said that they had been informed of the intention of a separate party to submit a competing DOCA proposal that, at the time of the Report had not been formalised but would provide a return of 100 cents in the dollar to unsecured creditors.

14. The Administrators said in the Report that creditors may wish to adjourn the second meeting of creditors for a period of up to 45 business days to allow further time to analyse the DOCA proposals. That would include liaising with the proponents of the DOCA proposals in order to provide their opinion to the Association’s creditors. The Administrators said that, if the meeting were to be adjourned, they would compare the DOCA proposals and issue a supplementary report and notice of resumed meeting to creditors.

15. The Report said that, although the Association has a surplus of assets over liabilities, it is insolvent because it was unable to pay its liabilities as and when they fell due. The preliminary investigations of the Administrators indicated that the Association had no internal means of passing a special resolution to approve payment of its liabilities, which were predominantly incurred in the proceedings in this Court.

16. The Report said that the Committee of Management of the Association may have breached their duties or contravened the Corporations Act regarding proper appointment procedure and member record keeping and that further investigations into potential breaches of duties would be undertaken by a liquidator should one be appointed. The Administrators said in the Report that they considered that it would be in the creditors’ interest for the Association to be wound up, which meant that a liquidator would be appointed who would seek to realise the Association’s assets and return money to creditors. However, the Report said, the Administrators considered it would be beneficial for the upcoming meeting of creditors to be adjourned for a period of 45 business days to allow further time for the competing proposal to be formalised and for them to analyse both DOCA proposals and provide an updated recommendation to creditors. On 14 October, the second meeting of creditors was adjourned to resume on a date no later than 16 December 2020.

The Present Questions

17. On 24 September 2020, the Dissenting Members filed a motion in this Court seeking an order that they be granted leave to proceed with the appeal pursuant to s 440D(1)(b) of the Corporations Act. In support of that motion, the Dissenting Members rely on an affidavit sworn on 24 September 2020 by their solicitor, Mr Andrew Lacey. The application for leave pursuant to s 440D is opposed by Mr Theophilus Premetis and Mr Panayiotis Diamadis (together the Intervenors), who are respectively the Treasurer and Secretary of the Association, and by the members and executive committees of eight AHEPA Chapters (the Eight Chapters Membership) as follows:

1. Chapter Alexandros Inc;

2. Chapter Anatole Inc;

3. Chapter Antigone Inc;

4. Chapter Chiron Inc;

5. Chapter Diogenes Inc;

6. Chapter lppokratis Inc;

7. Chapter Odysseus Elytis Inc; and

8. Chapter Platen Inc.

18. Several questions have now been raised for consideration by the Court as follows:

1. Whether s 440D operates to prevent this Court from making orders to give effect to the conclusions reached in the Principal Reasons.

2. If so, whether the Court should grant leave pursuant to s 440D.

3. Whether the Court should make substantive orders or should remit the proceedings to the primary judge for the formulation of orders and for the purpose of considering an application for leave to reopen.

4. If the Court should make substantive orders, whether the orders should be as proposed by the Dissenting Members or in some other form.

Application of s 440D of the Corporations Act

19. Section 440D of the Corporations Act relevantly provides that, in so far as it is applied by the 2009 Association Act:

Stay of proceedings

(1)   During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:

(a)   with the administrator's written consent; or

(b)   with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

…

Thus, a proceeding in a court against an incorporated association cannot be proceeded with during the administration of the association. The Dissenting Members accept that the proceedings in this Court are a proceeding in a court against the Association within the meaning of s 440D(1). On one view, the provision only prohibits steps being taken by a party to proceedings and would not prohibit the delivery of judgment in respect of proceedings where there has been a full hearing. On that view, the delivery of judgment is a step taken by the Court and not by a party. [1] The contrary view is that the language of s 440D is unambiguous and clear and there is no reason to construe it as not applying to the making of orders by a Court following a full hearing on the merits. [2]

1. See Lianos v Order of AHEPA NSW Inc [2020] NSWCA 193.

2. See Sovereign MF Limited v Compliance and Risk Services Pty Ltd [2013] VSC 213 at [8]-[10]; Unilever Australia Limited v Rosella Foods Pty Limited [2012] NSWDC 221; 15 DCLR (NSW) 185 at [76]-[86].

20. The language used in the section is in the passive. However, the Dissenting Members contend that s 440D(1) should be understood as meaning “a person cannot proceed with proceedings”, that being the language used in s 444E(3) and s 471B of the Corporations Act. They say that, since the Court is not a “person”, it is not constrained by the provision and, accordingly, can make orders giving effect to the conclusions reached by it.

21. Secondly, the Dissenting Members say, since the object of Pt 5.3A of the Corporations Act is to provide, relevantly, for the business, property and affairs of an insolvent association to be administered in a way that maximises the chances of the association, or as much as possible of its business, continuing in existence or, if that is not possible, results in a better return for the association’s creditors and members than would result from an immediate winding up. [3] The purposes of s 440D include affording an administrator time to assess and report on the association without the distraction of proceedings in court. The purposes also include putting a brake on legal and associated costs, allowing time for the development of proposals to preserve the value of an association as a going concern, giving the creditors time to consider their position for the purposes of the necessary meeting of creditors and, in appropriate cases, preventing a creditor obtaining some advantage over other creditors or potential creditors. [4] The Dissenting Members say that, in the context of those effects, it was not the intention of the Parliament to prevent final orders being made in a matter where the Court has already published its reasons for the conclusions reached by the Court. In such circumstances, they say, there is nothing left to be proceeded with, since the proceedings consisting of the appeal to this Court have effectively been run to conclusion. Thus, they say, there is no prospect of any undue distraction for the Administrator or creditors nor of any drain on the resources of the Association. The consequence of final orders not being made is to leave the parties in an unsatisfactory position where, the appeal having been determined, the relief to which the Dissenting Members have been found to be entitled will not be granted.

    3. See X Pty Ltd (Admin App) v Milstead [2015] FamCAFC 50; 54 Fam LR 443 at [38]-[51].

    4. See Corporations Act 2001 (Cth), s 435A.

20. Those latter contentions, however, may very well be cogent reasons for granting leave under s 440D(1)(b) if leave is required. However, the contentions do not support the notion that leave is not required. The appeal has not yet been resolved. Theoretically, it would be open to the Court to withdraw its reasons, or vary them, with the consequence that the result may be different. While the Court has published reasons for its final conclusions, it has invited the parties to formulate the appropriate orders in the light of those conclusions, having regard to the complexities of the issues raised in the appeal. It could not be doubted that, if the Court elected to withdraw its reasons, and on one view that is what it is being asked to do by the Intervenors, inviting further argument would involve proceeding with the appeal.

21. The Court has invited the parties to make submissions as to the appropriate orders in the light of the conclusions reached by it. Those submissions involve taking a step towards the final resolution of the appeal. It follows that leave is required under s 440D(1)(b).

Grant of Leave to Proceed

24. The discretion conferred on the Court by s 440D(1)(b) must be exercised in the light of the objects of Pt 5.3A and the effect of s 440D(1). While there have been suggestions that leave will rarely be granted,[5] that proposition must be understood in the circumstances of the particular case in which leave is sought. Thus, it may well be that leave will rarely be granted where a claimant seeks to enforce a debt against an association that is subject to administration, where either a DOCA or a liquidation will require the lodging of a proof of debt by the claimant. If there is a real dispute about the debt, leave might well be granted but on terms that no step be taken to enforce any judgment except by way of proof of debt in the administration or winding up. On the other hand, where a claim consists of a dispute as to the ownership of property, it may well be that there would be no reason to withhold the grant of leave. Further, where a dispute concerns governance of an association, as is the present dispute, there would be every reason for leave to be granted to ensure certainty in relation to the administration or the winding up.

    5. See Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2001] NSWSC 1305; 285 ALR 207 at [38].

25. The basis upon which the grant of leave is resisted by the Eight Chapters Membership and by the Intervenors is that there is an expectation that the opportunity to make an application for leave to appeal to the High Court of Australia from the orders of this Court might be lost while the creditors of the Association consider either the approval of a DOCA or the winding up of the Association. However, that time constraint has been created by the timing of the appointment of the Administrators. There is nothing before this Court to suggest that the financial position of the Association changed materially simply by reason of the publication of the Court’s reasons. It must have been foreseen as a possibility that the appeal by the Dissenting Members might be upheld, with whatever consequence that may have had on the liabilities of the Association.

26. No proposed grounds of appeal to the High Court have been identified on behalf of the Association by the Eight Chapters Membership or the Intervenors. If the administration is brought to an end, and the Association determines to apply for special leave to appeal but the time within which it is entitled to do so has expired, it would be open to apply for an extension of time under r 41.02.2 of the High Court Rules 2004 (Cth). It would then be a matter for the High Court to determine whether the Association should be granted that indulgence, having regard to the circumstances in which the administration commenced and having regard to the proposed grounds of appeal. Further, the appeal to this Court turned on the construction of the provisions of various instruments constituting the Association and related entities. It is difficult to discern any legal question of public importance. There may therefore be considerable doubt as to whether or not an application for special leave to appeal to the High Court would be successful.

27. The alternative basis upon which leave to proceed is opposed is the prospect of reopening. Absent leave to reopen, there is every reason why leave to proceed should be granted in order to finalise the appeal.

28. The Intervenors assert that the Court should refuse to grant leave to proceed because the prejudice to the Association if leave to proceed were granted would outweigh any prejudice to the Dissenting Members if leave to proceed were refused. Thus, the Intervenors say, if orders are made, the period within which the Association may make an application for special leave would have expired before control of the Association reverted to the Committee of Management, assuming there was no winding up of the Association. While the Association remains under voluntary administration, all powers in relation to the conduct of the appeal and any prospective application to the High Court for special leave rests solely with the Administrators: the Committee of Management will not resume control until after the termination of the administration. The Intervenors are concerned that, contrary to the interests of persons who claim to be members of the Association, if the orders of this Court take effect, it is likely that there will be a change in the control of the Committee of Management immediately following upon the making of the orders. The Intervenors express the concern that that change of control may well result in the abandonment of any possibility of an application for special leave to appeal. That is to say, upon making orders to give effect to the conclusions reached by this Court, persons who claim to be members of the Association “would be disenfranchised of any eventual right to appeal” to the High Court.

29. However, if it were to be suggested that failure to seek special leave to appeal to the High Court from the orders of this Court was in some way oppressive of the interests of some individuals, it may well be that those individuals would have a remedy in respect of the action and conduct of any new Committee of Management. That, however, is not a question that can be considered in the present circumstances. That would be a matter for other proceedings if that circumstance were to arise. Of course, such a claim in that regard assumes the incorrectness of the conclusions of this Court.

30. In any event, as the Intervenors acknowledge, control of the Association is presently in the hands of the Administrators. It would be open to the Administrators to file an application for special leave to appeal in the name of the Association, following the making of orders by this Court. It would be a matter for the Eight Chapters Membership, the Intervenors or any other interested person to persuade the Administrators that that is an appropriate course to be adopted. It may be that the Administrators would do so on terms that they be funded in any event by persons other than the Association. That would be a matter for those persons. Those considerations are not a basis for refusing leave in the circumstances of this case.

Reopening and Remitter

31. The Intervenors contend that, if the Court is disposed to make orders, the orders should be limited to allowing the appeal, setting aside the orders made by the primary judge and remitting the matter to the primary judge to make declarations in accordance with the reasons of this Court. The Intervenors assert that such orders would be consistent with procedural fairness because it would enable an application to reopen the hearing. It would also enable an application by the Intervenors and any other person directly affected by the conclusions of this Court to make an application for joinder to the proceedings. It appears that the Intervenors contemplate an application to reopen the hearing before the primary judge in order to tender a copy of additional documents relating to the formation of the Associations as well as documents relating to AHEPA Australasia.

32. On 13 April 2018,[6] Black J made orders by consent under s 1322(4)(a) of the Corporations Act, as applied by the 2009 Associations Act and the Associations Incorporation Regulation 2016 (NSW), whereby certain resolutions of the Association purportedly passed in 2005, 2007 and 2010 were not invalid. Black J also noted an agreement between the parties to the proceedings before him to the effect that the members of the Association consisted of all persons who, as at the 30 June date immediately preceding the holding of a proposed Special General Meeting, were financial members of the following 13 Chapters of the Association:

    6. See Foxcroft v Ink Group Pty Ltd (1994) 15 ACSR 203 at 205.

“Schedule 1 – List of Chapters

1   Chapter Arete No.3 (a female chapter);

2   Chapter Platon No. 4 (a combined chapter);

3   Chapter Prometheus No.6 (a male chapter);

4   Chapter Anatole No.7 (a male chapter);

5   Chapter Diogenes No.8 (a combined chapter);

6   Chapter Antigone No.8 (a female chapter);

7   Chapter Antigone No.27 (a combined chapter);

8   Chapter Heracles No.12 (a combined male/female chapter);

9   Chapter Apollon No.16 (a male chapter);

10   Chapter lppokratis No.21 (a combined male/female chapter);

11   Chapter Chiron No.22 (a combined male/female chapter);

12   Chapter Alexandros No.25 (a combined chapter); and

13   Chapter Odysseas Elytis No.26 (a combined male/female chapter).”

33. The Eight Chapters Membership assert that, since registration of the Association in 1993 the Association and each Chapter of the Association has conducted its affairs in accordance with a particular book of rules. They assert that the Association has its own “constitution/rules”, which could be rendered a nullity by the declarations proposed by the Dissenting Members and that the problems of lack of clarity will continue if the declarations are made in that form.

34. They also point to the inherent problem of the existence of two separate entities, being AHEPA Australia Limited, a company limited by guarantee, and the Association, which is incorporated under the provisions of the 2009 Associations Act, in circumstances where no step has been taken that could be characterised as the equivalent of a buyout of shares or payment of any consideration by AHEPA Australia Limited to the Association to create a subservient structure such as a wholly owned subsidiary.

35. The Eight Chapters Membership assert that the term “AHEPA” is “an element in a compound”, namely, AHEPA NSW Incorporated or AHEPA Australia Limited. They assert that “AHEPA Australia” has never existed. The Eight Chapters Membership assert that AHEPA Australia Limited, a company limited by guarantee and governed by the provisions of the Corporations Act, would be required to adopt a constitution before or after its registration. If adopted before registration, each member was required to agree in writing to the terms of the constitution. If the constitution was adopted after registration, each member must be given the required notice and the company must pass a special resolution to adopt the constitution. Similarly, if a company wishes to change or repeal its constitution, it requires a special resolution to do so. That has not occurred.

36. The Eight Chapters Membership assert that they are not aware and remain unaware of the adoption of a constitution by AHEPA Australia Limited nor of any amendment of any such constitution. They assert that the Association has previously “utilised” but not adopted, the constitution of the Order of AHEPA Australasia but that, to the extent of conflict, the “constitution/rules” of the Association prevail. They say that the Association has never approved in any way of the creation of a different constitution.

37. The Constitution of AHEPA Australia Limited, as at 2017 states:

“AHEPA means this company, previously unincorporated and known as the Order of AHEPA Australasia. For completeness AHEPA stands for Australian Hellenic Educational Progressive Association.”

The Eight Chapters Membership assert that there is no evidence that there has ever been a change of name which would require a special resolution.

38. The Eight Chapters Membership assert that, while this Court has jurisdiction to make declarations, it rarely does. They contend, therefore, that the matter should be remitted to the primary judge to make declarations. The Eight Chapters Membership also assert that there are several further “contradictions and contradistinctions” between “the Orange Book” in relation to the Association and AHEPA Australia Limited. They assert that they are concerned to ensure that none of the declarations made would give rise to “any subservience” that does not as a matter of historical or current process or structure exist. The Eight Chapters Membership support the application made by the Intervenors that the matter be remitted to the primary judge with a view to an application being made to reopen the hearing.

39. Much of what is now being advanced on behalf of the Intervenors and the Eight Chapters Membership appears to be new contentions that were not advanced by the Association, based on material that was not before the primary judge or this Court. If there is documentary evidence that was not before the primary judge and, therefore, not before this Court, which may have a bearing on the issues in the proceedings, including the appeal to this Court, the appropriate course would have been to seek leave of this Court to adduce additional evidence on the hearing of the appeal. The hurdles to be overcome in obtaining such leave are well known. [7]

    7. See In the matter of Order of AHEPA NSW Incorporated [2018] NSWSC 458.

Formulation of Orders

40. The Eight Chapters Membership assert that the declarations now sought by the Dissenting Members are not contained either in their amended originating process of 8 March 2019 or in their notice of appeal of 25 October 2019. Accordingly, they oppose the orders proposed by the Dissenting Members.

41. In their notice of appeal to this Court, the Dissenting Members sought, relevantly, orders that the judgment of the primary judge be set aside and that, in lieu of the orders made by the primary judge, the declarations and orders sought in prayers 7, 8, 9, 10A, 10B, 10C and 10D of the amended originating process of 8 March 2019 be made. The precise terms of those prayers for relief are set out in Appendix 1 to these reasons. Their effect may be stated as follows:

1. A declaration that the resolutions purported to be passed at the special general meeting of the Association held on 13 November 2018 are invalid.

2. A declaration that, since 1 December 2018, the Association has not validly appointed any person to occupy the office of Secretary or Treasurer of the Committee of Management of the Association.

3. An order that the purported constitution of the Association be removed from the register of incorporated associations and that the rules of the Association in effect immediately before the registration of the purported Constitution be entered in the register of incorporated associations.

10A.   An order that the Association be restrained from proposing certain motions or resolutions relating to the proposals involving Bexley North Bowling Club referred to in the Principal Reasons.

10B.   A declaration that a motion authorising the Committee of Management to obtain funds for the construction and completion of Stage 1 of the Bexley North Bowling Club project is invalid and of no effect.

10C   A declaration that the reference in cl 3(1) of the Rules of Association to the “unincorporated association” has been and is a reference to those chapters (or units) of AHEPA Australia Limited that are geographically located in New South Wales.

10D   A declaration that, in order to become a member of the Association entitled to vote at any general meeting of the members of the Association, a person must have been a financial member of a New South Wales based chapter (or unit) of AHEPA Australia Limited on 30 June of the last financial year.

42. The orders now proposed on behalf of the Dissenting Members are as set out in Appendix 2 to these reasons, with one change referred to below. [8] Declaration 3. a is supported by the Dissenting Members on the basis of paragraphs [48], [114]-[116], [141] and [146] of the Principal Reasons. Declaration 3. b is supported by the Dissenting Members on the basis of paragraphs [38]-[41], [114]-[116], [118]-[119], [123]-[125], [129], [147] and [157] of the Principal Reasons. Declaration 3. c and Order 3. d are supported by the Dissenting Members on the basis of paragraph [158] of the Principal Reasons. Order 3. e is supported by the Dissenting Members on the basis of paragraph [159] of the Principal Reasons. Declaration 3. f was not the subject of a ruling in the Principal Reasons. However, it was conceded in the Association’s written submissions to this Court in the hearing of the appeal [9] that, if the Dissenting Members succeeded on the issue of the 13 November 2018 resolutions, they would be entitled to that relief.

    8. See for example Akins v National Australia Bank (1994) 34 NSWLR 155.

    9. See par [44] below.

43. The Eight Chapters Membership now assert that the questions in the appeal were limited to orders made with respect to voting on specified amendments to the constitution and rules of the Association, whereas the Declaration 3. a seeks to gain an advantage in applying the definition generally to all circumstances where the phrase “unincorporated association” is used. They assert that that was not the subject of the proceedings before the primary judge or the appeal.

44. Declaration 3. a is clearly based on the declaration sought in prayer 10C of the amended originating process, with amendments to reflect the Principal Reasons. There are two differences. First, prayer 10C referred only to the meaning of the term “unincorporated association” in cl 3(1) of 2018 Rules of the Association whereas Declaration 3. a also refers to a number of other clauses. That difference arises from the conclusion in paragraph [146] of the Principal Reasons that the numerous references to the “unincorporated association” found in Part II and Part III of the 2018 Rules of the Association have the same meaning. Declaration 3. a was intended to refer to the clauses where the term “unincorporated association” is found in Part II and Part III of the Rules, namely, cll 1(2)(f), 2(1)-(3), 3(1), 4(1), 5(1)(d), 14, and 15. Declaration 3. a, as drafted, referred to cl 1(f), which does not exist. It is apparent that “cl 1(f)”, was intended to be a reference to cl 1(2)(f) and any final orders should reflect that correction to what appears to be a drafting error.

45. The second difference is that prayer 10C sought a declaration that “unincorporated association” was a reference to those Chapters of AHEPA Australia Limited that are geographically located in New South Wales whereas proposed Declaration 3. a is that the term “unincorporated association” refers to AHEPA Australia Limited, being the successor of the unincorporated association previously known as “Australian Hellenic Educational Progressive Association”. That difference arises from the conclusion in paragraphs [114]-[116] of the Principal Reasons that “unincorporated association” does not refer to the Chapters alone, as distinct from AHEPA Australia. That is to say, the declaration sought in prayer 10C would not have accorded with the Principal Reasons.

46. Further, paragraph [48] of the Principal Reasons concluded that AHEPA Australia Limited is the successor of the previous unincorporated association. That is also supported by the reasoning at paragraphs [128]-[131] of the Principal Reasons. In addition, the Court concluded at paragraphs [146]-[147] of the Principal Reasons that the term “unincorporated association” refers to AHEPA Australia or its successor.

42. The Eight Chapters Membership assert that Declaration 3. b proposed by the Dissenting Members purports to ignore or override the 2018 Rules of the Association in that it seeks to adopt paragraph 2 of Part X of the Constitution of AHEPA Australia Limited, which states as follows:

“(a)   Any member wishing to recommend a person for members in the Order shall submit to the Secretary of their Chapter an application for membership in writing and in the prescribed form.

(b)   Each application shall contain the names and addresses of three persons for reference.”

The Eight Chapters Membership assert that there are not and there have never been such prescribed forms. Further, they say, the steps set out have never been undertaken and the members of the Eight Chapters Membership have not participated in any initiation since the incorporation of AHEPA Australia Limited.

48. Accordingly, the Eight Chapters Membership say, they are not members of AHEPA Australia Limited and the proposed format for becoming a member is contrary “to its own rules/constitution”. They say that the amendment to the constitution of AHEPA Australia Limited to defer to the rules of the Association “appears to have been excised from the Constitution of AHEPA Australia Limited without the knowledge or consent of the members of the [the Association]”.

49. The Eight Chapters Membership assert that their members are unaware that AHEPA Australia Limited or any predecessor of AHEPA Australia Limited adopted the process set out in Part X of the Constitution of AHEPA Australia Limited. They assert that none of their members is aware of and has never seen any copy of a list of members of AHEPA Australia Limited or its current Constitution and none has attended or voted at any meeting.

50. The Eight Chapters Membership assert that the procedures for making members of the Association are wholly contained within Part II of the Rules. Clause 48 states that, if there was a conflict in the Constitution of the unincorporated association with the rules of the incorporated association, the latter takes precedence. Accordingly, the Eight Chapters Membership say, to the extent that “the unincorporated association” is to be understood as referring to AHEPA Australia Limited, the Association is nevertheless to be governed by its own rules and, accordingly, the second proposed declaration should not be made.

51. The Eight Chapters Membership assert that, to the extent that any declaration is made referring to a “Chapter”, the declaration must spell out precisely what is meant since, otherwise, the Chapters with which the Dissenting Members are associated or affiliated may seek “to dictate the Order and [the Association]”, which consists of 13 Chapters. Therefore, they assert, they are at risk of “being excluded going forward”. They assert that, unless the Chapters referred to in any declaration are clearly defined, particularly having regard to the fact that no member of the Eight Chapters Membership has ever been invited to become a member of AHEPA Australia Limited and has never signed a form applying to become a member, the Eight Chapters Membership, which effectively constitute 80% of the membership of the Association, could be disenfranchised from the operations of “the AHEPA movement” and that that was not the intention of the declarations originally sought and the Court should therefore not make such declarations.

52. Declaration 3. b is substantially the same as the declaration sought in prayer 10D of the amended originating process. The Dissenting Members succeeded on the questions relating to that declaration and are therefore entitled to the relief they sought. The Principal Reasons reached conclusions:

1. regarding the membership requirements in Part X of the 1990 AHEPA Regulations, the present versions of which are found in Part X of the 2010 by-laws; [10]

2. that the term “unincorporated association” in the 2018 Rules of the Association refers to AHEPA Australia or its successor; [11]

3. that the chapters are subordinate to AHEPA Australia; [12]

4. regarding the membership provisions of the 1998 AHEPA Regulations, the 1990 AHEPA Constitution and the 2018 Rules of the Association. [13]

   10. See First Respondent’s Written Submissions (filed 30 Januarys 2020) at [79] (Orange 105P-R).

   11. See Principal Reasons at [38]-[41].

   12. See Principal Reasons at [114]-[116].

   13. See Principal Reasons at [116], [124]-[125], [128] and [129].

53. Accordingly, the orders proposed on behalf of the Dissenting Members reflect quite fairly the conclusions reached in the Principal Reasons and, on the assumption that orders are to be made by the Court at this stage, the orders proposed by the Dissenting Members should be made. However, any question of possible reopening should be disposed of before the orders become effective.

Conclusion

54. The Court should make orders and declarations as proposed on behalf of the Dissenting Members. However, the orders should be stayed for 21 days.

**********

Appendix 1

Final Orders sought in Amended Originating Process filed 8 March 2019

1. A declaration that the resolutions purported to be passed at the special general meeting of the Association held on 13 November 2018 are invalid and further or alternatively, that proceedings at that meeting were void.

2. A declaration that since 1 December 2018 the Association has not validly appointed any person to occupy the office of Secretary or Treasurer of the Committee of Management of the Association.

3. An order that the Department remove the Purported Constitution from the Register of Incorporated Associations and enter the Rules of the Association which were in effect immediately before the registration of the Purported Constitution to the Register of Incorporated Associations.

4. [Not used].

10A.   An order that, the first defendant, itself and by its officers, employees, servants and agents, be restrained from proposing or causing to be proposed, or permitting voting to occur in respect of the following motions or resolutions referred to in the notice dated 10 January 2019 signed by Panayiotis Diamadis, and circulated to certain members of the Association at the annual general meeting on 28 January 2019, or any adjourned or subsequent meeting of members of the first defendant:

a.   that the 64th State Convention authorises the Grand Lodge and the Management Committee of the Association to proceed with the lease and works agreed with the Bayside Council regarding the Development of the new building in Bexley North Bowling Club; and

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

10B.   A declaration that the following motion referred to in the notice of general meeting dated 11 February 2019 signed by Bill Skandalakis and Panayiotis Diamadis, circulated to certain members of the Association, and subsequently purported to be declared carried at a general meeting of the Association on 28 February 2019, in the following terms is invalid and of no effect.

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

10C.   A declaration that, on and from the registration of the 2005 resolutions, the 2007 resolutions, and the 2010 resolutions in accordance with the orders of Black J made on 13 April 2018 in proceeding number 2016/380711 in the Supreme Court of New South Wales ("Registration Date"), the reference in clause 3(1) of the Rules of the Association to the "unincorporated association" has been and is a reference to those Chapters (or Units) of AHEPA Australia Limited ACN 620 348 923 ("AHEPA Australia") that are geographically located in New South Wales.

10D   A declaration that, on and from the Registration Date, in order to become a member of the Association who is entitled to vote at any general meeting of the members of the Association, a person must have been a financial member of a New South Wales-based Chapter (or Unit) of AHEPA Australia on the 30^th of June of the last financial year, such membership to have occurred in accordance with Part X of the By-Laws of AH EPA Australia, as promulgated by the National Convention pursuant to clause 2 of Part X of the Constitution of AHEPA Australia.

1. Costs.

2. Such other or further order as the Court thinks fit.

Appendix 2

Orders Proposed by Dissenting Members

1. Appeal allowed.

2. Set aside orders made by the primary judge on 3 October 2019.

3. In lieu thereof:

a.   Declare that, on and from the registration of the 2005 resolutions, the 2007 resolutions, and the 2010 resolutions in accordance with the orders of Black J made on 21 March 2018 in proceeding number 2016/380711 in the Supreme Court of New South Wales (Registration Date), the references in clauses 1(2)(f), 2(1)-(3), 3(1), 4(1), 5(1)(d), 14, and 15 of the Rules of the first respondent (Association) to the “unincorporated association” has been and is a reference to AHEPA Australia Limited ACN 620 348 923 (AHEPA Australia), being the successor to the unincorporated association previously known as the “Australian Hellenic Educational Progressive Association”.

b.   Declare that, on and from the Registration Date, in order to become a member of the Association who is entitled to vote at any general meeting of the members of the Association, a person must have been a financial member of a Chapter (or Unit) of AHEPA Australia that is geographically situated in New South Wales on the 30th of June of the last financial year, such membership to have occurred in accordance with Part X of the By-Laws of AHEPA Australia, as promulgated by the National Convention pursuant to clause 2 of Part X of the Constitution of AHEPA Australia.

c.   Declare that the resolutions purported to be passed at the special general meeting of the Association held on 13 November 2018 are invalid and that the proceedings at that meeting were void.

d. Order that the second respondent rectify the Register of Incorporated Associations maintained under s 98 of the Associations Incorporation Act 2009 (NSW) by removing the purported constitution of the Association registered on or about 18 December 2018 from the Register.

e.   Declare that the resolution (described as a “motion”) referred to in the notice of general meeting dated 11 February 2019 signed by Bill Skandalakis and Panayiotis Diamadis, circulated to certain members of the Association, and subsequently purported to be declared carried at a general meeting of the Association on 28 February 2019, in the following terms, is invalid and of no effect:

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

f.   Declare that between 1 December 2018 and 15 March 2019, the Association did not validly appoint any person to occupy the office of Secretary or Treasurer of the Committee of Management of the Association.

1. The first respondent to pay the appellants’ costs of the appeal.

2. The first respondent to pay the appellants’ costs in the court below.

**********

Endnotes

Decision last updated: 26 November 2020