National Roads and Motorists' Association Ltd v Parkin - [2004] NSWCA 153

NEW SOUTH WALES COURT OF APPEAL

CITATION: National Roads and Motorists' Association Limited v Parkin [2004] NSWCA 153

FILE NUMBER(S):
40317/04

HEARING DATE(S): 12/05/04

JUDGMENT DATE: 25/05/2004

PARTIES:
National Roads and Motorists' Association Limited (Appellant)
John Parkin (Respondent)

JUDGMENT OF: Santow JA Ipp JA Bryson JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 2063/04

LOWER COURT JUDICIAL OFFICER: Campbell J

COUNSEL:
T F Bathurst QC/R G McHugh (Appellant)
J B Whittle SC/J V Gooley (Respondent)

SOLICITORS:
Corrs Chambers Westgarth (Appellant)
Turner Freeman (Respondent)

CATCHWORDS:
CORPORATIONS - Whether proposed resolutions for special general meeting of a company void due to ambiguity - Where proposed resolutions would limit the powers of the company - Whether proposed resolutions void for uncertainty - Correct test to be applied to determine uncertainty - EVIDENCE - Whether extrinsic evidence can be used to construe company's constitution. D

LEGISLATION CITED:
Corporations Act 2001 (Cth), ss 124, 125, 249D, 249L
Industrial Relations Act 1996 (NSW), s 42(1)

DECISION:
Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40317/04
ED 2063/04
SANTOW JA
IPP JA
BRYSON JA
Tuesday 25 May 2004

NATIONAL ROADS AND MOTORISTS’ ASSOCIATION LIMITED v PARKIN

FACTS

An enterprise agreement covering many employees of National Roads and Motorists’ Association Limited (“NRMA”) has expired. Negotiations between NRMA and the union representing these employees regarding new conditions have not been successful. The employees concerned wish to put their case to a general meeting of the NRMA.

Under s 249D of the Corporations Act 2001 (Cth) the directors of a company must call and arrange to hold a general meeting of the company on the request of a certain number of members. The employees gathered the required number of signatures and called on the directors to call a general meeting of the company to consider two resolutions, both proposing to insert an additional clause in the constitution of the NRMA.

The first insertion would be a clause stating that the relevant employees “are not disadvantaged in the provision of [the services which they provide] by having their current working conditions undermined”. The second insertion would be a clause stating that an object of the NRMA is to “ensure fair and equitable remuneration and working conditions are available to all employees” and to ensure that the relevant employees are not “discriminate[d] against”.

NRMA disputed the validity of the two resolutions contained in the requisition (and, hence, the validity of the requisition) on the grounds of ambiguity, and alternatively, uncertainty. NRMA brought proceedings seeking a declaration that the requisition was void and that the directors of NRMA were therefore not required to call and hold a general meeting. Campbell J declined to make the orders sought, and the NRMA appeals against his Honour’s decision.

HELD (per Santow JA):

Campbell J, correctly, did not provide a specific answer as to the proper construction in the several cases where ambiguity was alleged. It will be for future cases to determine whether or not one or other object is void for uncertainty. That determination will take account of the actual circumstances of a live dispute that then obtain.

HELD (per Ipp JA, Santow JA and Bryson JA agreeing):

Ambiguity does not mean uncertainty. The fact that opinions may differ as to which of two possible meanings is to be given to the words of a clause in a contract does not mean that the clause is uncertain. The correct test to be applied is that in Upper Hunter County District Council v Australian Chilling and Freezing Limited (1968) 118 CLR 429.
The ambiguity of the resolutions would be a weighty argument in the defence of claims against directors or other officers that may arise from ambiguous resolutions being passed. That these resolutions may cause litigation, inconvenience and expense to NRMA is readily apparent. However mere ambiguity (not constituting uncertainty) in expression in defining and delimiting the powers of a company is insufficient reason to hold that those provisions are invalid.
Leaving problems such as ambiguity in resolutions to be resolved at a company’s general meeting, where possible, has long been the approach of the courts. If the company, its members and directors, wish to operate pursuant to ambiguous powers (which are not uncertain), it is open to them to do so, that is not a matter for the courts.
Extrinsic evidence should not be used in construing the company’s constitution. The approach laid down in Egyptian Salt and Soda Company Limited [1931] AC 677 and Bratton Seymour Service Co Ltd v Oxborough [1992] BCLC 693 should be followed.
In regard to the first proposed resolution, it would not be an easy task to identify what is meant by the passages “current working conditions” and “are not disadvantaged in the provision of such service by having their current working conditions undermined”. However, in each case, it would be possible for a court to arrive at a formula that would resolve the problems raised. Furthermore, it does not matter if a clause contains a series of ambiguities, provided that each can be resolved. Campbell J did not err in this regard.
In regard to the second proposed resolution, again there may be difficulty in identifying what amounts to “fair and equitable remuneration and working conditions” for “all employees”, and whether a working “package” discriminates against the relevant officers. However, while difficult, these are not tasks which are inherently incapable of being performed. Campbell J did not err in this regard.
It is not necessary and in fact undesirable for the Court, in these proceedings (or for Campbell J, in the proceedings before his Honour) to attempt to answer the hypothetical questions posed. It is sufficient if the Court considers that the question is reasonably capable of resolution.

HELD per Bryson JA:

The order refusing the declaration sought involves a question respecting a civil right of the value of more than $100,000. For this reason the appeal is brought as of right.

ORDERS:

The appeal is dismissed with costs.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40317/04
ED 2063/04
SANTOW JA
IPP JA
BRYSON JA
Tuesday 25 May 2004

NATIONAL ROADS AND MOTORISTS’ ASSOCIATION LIMITED v PARKIN

Judgment

SANTOW JA: I agree with the judgment of Ipp JA which I have had the advantage of reading in draft, subject to the following additional observations.
In these proceedings various declarations are sought. Their effect if made would deny legal efficacy to the request, purportedly in pursuance of s249D(1) of the Corporations Act 2001 (Cth), to convene a meeting of members for the purpose of passing certain resolutions which purport to amend the constitution to insert what are described as “Objects”.
In concluding that the declarations sought should not be made, I agree that the proper approach to be adopted in considering whether the relevant objects sought to be introduced are void for uncertainty is that enunciated by Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Company Limited (1968) 118 CLR 429 at 437; that is, one which is neither narrow nor pedantic.
That is however to state the matter in necessarily general terms. There remain questions such as the extent to which resort may later be had to extrinsic evidence in resolving ambiguity, should a real dispute later arise concerning whether ambiguity in one or other of these objects is, or is not, capable of resolution, and with what consequence for validity. There may well be particular difficulty in resolving such ambiguity because of the general reluctance of Courts to admit extrinsic evidence as to the meaning of a corporate constitution; see for example, Santos Ltd v Pettingell (1979) 4 ACLR 110 at 117-9 per Rath J. While the doctrine of ultra vires has been abolished, there is, as Ipp JA explains, still the possibility of claims for injunctions or oppression arising out of alleged contravention of the terms of the corporate constitution. Third parties still have some interest in what is recorded in the company’s constitution. This is more particularly where, as here, what purports to be an object may in reality be intended to be a constraint on the powers of the directors when it comes to negotiating an enterprise agreement.
Campbell J did not provide a specific answer as to the proper construction in the several cases where ambiguity was alleged, these being by way only of example. He concluded simply that the question of construction was in his opinion reasonably capable of resolution. He thus, correctly in my opinion, eschewed any actual performance of that task of construction in relation to those various exemplified ambiguities brought out in argument.
However, this carries with it an important corollary, should the resolution be passed inserting the two additional objects. Future circumstances may later arise which put directly in issue whether either or both additions to the NRMA’s constitution, are void for uncertainty. A dispute of that kind would no longer be hypothetical. It would require the court actually to resolve the ambiguity or else conclude that the relevant provision was void for uncertainty. Questions of severability may also need to be answered. To the extent resort may be had to the then textual or broader context, that may well have a bearing different from the way things now appear.
There is therefore a danger in concluding positively that all ambiguities so far identified would be resolved when the anterior task of construction is not in fact performed in the context of an actual dispute going beyond the validity of the resolutions themselves. I would therefore wish to go no further than to conclude that the NRMA has failed to establish that the resolutions are so ambiguous as to lead to the conclusion that the declarations sought should be made. In particular and for that purpose, I would conclude that it has not so far been demonstrated by the NRMA that ambiguities in the objects sought to be introduced are incapable of being resolved.
By taking that approach and avoiding specific answers to hypothetical questions, it will be for future cases to determine whether or not one or other object is void for uncertainty. That determination will take account of the actual circumstances of a live dispute that then obtain, to the extent admissible.
There should in those circumstances be no issue estoppel in relation to such future questions.
IPP JA:
The issues on appeal: the parties’ basic contentions
This appeal concerns the validity of a requisition served on the appellant, National Roads and Motorists’ Association Limited (“NRMA”), requiring it to call a general meeting. The purpose of the meeting, according to the requisition, is to consider two resolutions set out therein. NRMA disputes the validity of the two resolutions in the requisition (and, hence, the validity of the requisition) on the grounds of ambiguity, and alternatively, uncertainty.
The requisition was served by a number of NRMA members. The respondent (“Mr Parkin”) has been appointed, by consent, to represent all the requisitioning members.
NRMA brought proceedings before Campbell J for declarations that the requisition is void (because of the invalidity of the resolutions) and that the directors of the NRMA are not required to call and to hold a meeting of members for the purposes of considering the resolutions in it. His Honour was not persuaded by NRMA’s arguments and declined to make the declarations sought.
NRMA submits that Campbell J erred in two respects.
Firstly, NRMA submits that his Honour, in determining whether the two resolutions contained in the requisition were invalid, should have applied the approach enunciated in Cotman vBrougham [1918] AC 514 by Lord Wrenbury, who said at (522):
“I cannot doubt that when the Act says that the memorandum must ‘state the objects’ the meaning is that it must specify the objects, that it must delimit and identify the objects in such plain and unambiguous manner as that the reader can identify the field of industry within which the corporate activities are to be confined.”
Campbell J did not apply Cotman vBrougham. Instead, his Honour applied the well known test for construing commercial documents laid down by Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Limited(1968) 118 CLR 429. In that case, Barwick CJ said (at 437):
“So long as the language employed by the parties … is not ‘so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention’ [Scammell (G) & Nephew Ltd v Ouston [1941] AC 251], the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved.”
NRMA submits that Campbell J’s failure to apply the test in Cotman vBrougham led him, wrongly, to hold that the two resolutions (and the requisition) were valid.
Secondly, NRMA submits that, even on the Upper Hunter test, Campbell J should have held that the two resolutions (and the requisition) were invalid.
Mr Parkin supports his Honour’s reasoning and decision.
The requisition
The requisition proposing the two resolutions in issue in this appeal was lodged following an industrial dispute between the appellant and some 400 patrol officers employed by it.
As Campbell J explained, the basis on which NRMA employs patrol officers varies. In particular, some of the 408 patrol officers operate as “home start patrols” whilst others operate under what have been referred to as “Option 3” patrol officer conditions.
The patrol officers are currently employed under an enterprise agreement arrived at under the Industrial Relations Act 1996 (NSW). The term of that enterprise agreement expired on 31 March 2003, but it continues to apply under s 42(1) of the Industrial Relations Act. Since the expiry of the enterprise agreement there have been negotiations between the NRMA and the union to which the patrol officers belong. The negotiations have not been successful and the patrol officers wish to put their case to a general meeting of the NRMA.
Pursuant to this decision the requisition for a general meeting was served on the NRMA. The requisition is in the following terms:
“Pursuant to Section 249(D) of the Corporations Act and Clause 9.2 of the National Roads and Motorists Association Limited Constitution, we, the following members of the National Roads and Motorists Association call upon the Directors of the NRMA to arrange for and hold a General Meeting.
In accordance with Section 249(D)(b) of the Corporations Act, we would propose the following special resolutions be considered and if thought fit passed by the General Meeting:
1.The constitution shall be amended to insert at 3, Objects, a new paragraph (E) in the following terms:
‘(E)To ensure that Patrol Officers employed to provide road side assistance to the membership of the NRMA, are not disadvantaged in the provision of such service by having their current working conditions undermined’.
2.The constitution shall be amended to insert at 3, Objects, a new paragraph (F) in the following terms:
‘(F)To ensure that fair and equitable remuneration and working conditions are available to all employees, further ensuring that such a package does not discriminate against existing Option 3 Patrol Officers.”
It is to be noted that, according to the requisition, the resolutions sought to be propounded are to be inserted into cl 3 of NRMA’s constitution. Clause 3 is the objects clause of the constitution.
By s 249D(1)(a) of the Corporations Act 2001 (Cth) the directors of a company must call and arrange to hold a general meeting on the request of a stipulated number of members. The required number of members have requested that a general meeting be held.
Section 249D(2) provides that the request for a meeting must state any resolution to be proposed at the meeting and s 249L provides that if a special resolution is to be proposed at the meeting the notice of the meeting must “state the resolution”. The resolutions so sought to be propounded are special resolutions. The formal requirements stipulated by s 249D and s 249L have been complied with.
The functions of the NRMA
The principal objects of NRMA (as set out in cl 3 of its constitution) are to promote the interests of motorists and other road users, throughout Australia, in good roads, safety and consumer protection, and to provide motorists and others with a “range of services”.
It is not an object of NRMA to make profits. Clause 3 of its constitution provides:
“All of the income and property of the Company must be used and applied solely in promotion of its objects and in the exercise of its powers as set out in this Constitution. Subject to rule 29, no part of the income or property of the Company may be distributed, paid or transferred directly or indirectly by way of profit to or amongst the Members.”
In National Roads and Motorists’ Association Limited v Geeson (2002) 40 ACSR 1 I noted (at 3, [7]):
“The applicant is a company limited by guarantee and does not have a share capital. Its principal function is to render roadside and other services to motorists. It has some 1.8 million members. As Bryson J pointed out, the applicant is so large and its activities are so pervasive that it is ‘part of the general organisation of society in New South Wales’.”
NRMA, in providing the services that it does, performs an important role in the commercial and industrial life of this country. There is no question that, in promoting the interests of motorists and other road users and in providing motorists with a range of services, NRMA aims to do so in a businesslike and efficient manner. Thus, although it does not have as its object the making of profits, it does in a material sense carry on a business and its activities in certain respects are not dissimilar from an ordinary commercial organisation. These matters are to be borne in mind when construing its constitution.
The ambiguity argument
NRMA’s first argument was that the objects and powers of a company must be defined in plain and unambiguous terms. It contended that in delimiting the powers of the company (which the proposed resolutions purport to do) a greater level of clarity and certainty is required than the test laid down in Upper Hunter by Barwick CJ. NRMA argued that the applicable test was the more stringent approach expressed by Lord Wrenbury in Cotman vBrougham.
I pause at this stage to note that ambiguity does not mean uncertainty: McDermott v Black (1940) 63 CLR 161 at 175. As Gibbs CJ pointed out in Meehan v Jones (1982) 149 CLR 571 (at 578), the fact that opinions may differ as to which of two possible meanings is to be given to the words of a clause in a contract does not mean that the clause is uncertain. It was held in that case that a contract will only be said to be uncertain if it is so obscure that the court is unable to put any definite meaning on its essential terms.
I do not think that there can be any doubt that the resolutions are indeed replete with ambiguities. This is apparent from a cursory examination. Mr Bathurst QC, who together with Mr McHugh appeared for NRMA, made it plain, however, that NRMA’s first argument assumes that the language of the resolutions is not so obscure and ambiguous as to be incapable of any definite or precise meaning. Thus, the first argument does not rest on the proposition that the resolutions are uncertain.

There are three limbs to the first argument. Firstly, NRMA argues that the resolutions seek to limit the powers of the company. Secondly, it argues that the resolutions are ambiguous. Thirdly, it argues that the mere existence of the ambiguities, because they concern a proposed alteration to the constitution that will limit the company’s powers, renders the resolutions void. Underlying this argument is NRMA’s acceptance (solely for the purposes of the argument) that a court will be able to attribute to the parties a particular contractual intention and the resolutions cannot be held to be void for uncertainty.
The first two limbs of the argument may be accepted. What is presently in issue is the third limb.
The Upper Hunter test is a forgiving one. As Campbell J explained:
“The way this test is applied in practice is that if the Court is capable of putting a meaning on the wording of the document, then it is not void for uncertainty – it has the meaning which the Court decides it has, no matter how difficult the task of ascertaining that meaning might have been.”
Campbell J, in essence, gave two reasons for applying the Upper Hunter test (and not the Cotman vBrougham test) to the requisition.
Firstly, he pointed out that in Cotman vBrougham Lord Wrenbury was considering legislation that concerned specifically the “objects specified in the memorandum” of a company. His Honour observed, further, that Lord Wrenbury’s statement was made at a time when the doctrine of ultra vires applied to corporations, and this doctrine was the basic reason for the approach expressed in Cotman vBrougham. The doctrine has now been abolished by s 125 of the Corporations Act which provides:
“(1)If a company has a constitution, it may contain an express restriction on, or a prohibition of, the company’s exercise of any of its powers. The exercise of a power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company’s constitution.
(2)If a company has a constitution, it may set out the company’s objects. An act of the company is not invalid merely because it is contrary to or beyond any objects in the company’s constitution.”
Accordingly, Campbell J observed:
“The objects in a company’s constitution, if a company chooses to have one, do not, under s 125, delimit the field of activity which it is legally possible for the company to engage in. … Thus, there is not the same need as there was, when the doctrine of ultra vires continued in existence, for there to be a publicly available statement of what the company could and could not do.”
Secondly, Campbell J pointed out that in NRMA Limited v Snodgrass (2001) 52 NSWLR 383 (at 387, [21]) this Court accepted that it was appropriate to apply the Upper Hunter test in deciding whether a proposed amendment of a constitution was so vague as to be meaningless, as did Young J in Totally and PermanentlyIncapacitated Veterans’ Association of NSW Ltd v Gadd (1998) 146 FLR 161 (at 167). Campbell J considered that, although it did not seem to have been argued in Snodgrass and Gadd that any other test was appropriate, the adoption of the approach in those cases was a strongly persuasive reason for adopting the UpperHunter test.
Mr Bathurst submitted that Campbell J’s reasoning could not be sustained.
Mr Bathurst submitted that the rationale of the approach adopted in Cotman vBrougham in regard to the objects of a company was equally applicable to the powers of a company. This submission was necessary as, although the requisition seeks to amend the objects clause of the constitution, the resolutions do not relate to the objects of NRMA, but rather, seek to impose limitations on the powers of its board of directors by requiring it “to ensure” that the terms of each of the two resolutions in question are complied with.
Mr Bathurst submitted that persons dealing with the company, including employees, directors and other officers, are entitled to a statement of the company’s powers in clear and unambiguous terms. He submitted that the practical consequences of applying any lesser standard “would be chaos”. In the present case, he said, it would not be possible for NRMA to achieve any certainty without recourse to the courts, who would have to decide the issues that would arise by reference to the nebulous concepts in the proposed resolutions which include such terms as “disadvantaged”, “undermined”, “fair and equitable”, and “discriminate”.
Finally, he submitted that Snodgrass and Gadd were distinguishable as the resolutions considered in those cases did not concern the powers of the companies and, moreover, it did not appear that Cotman v Brougham had been cited to the courts concerned.
The fact that the proposed resolutions go to the powers of NRMA and not its objects has two consequences. Firstly, Lord Wrenbury’s remarks in Cotman v Brougham are not of direct application. Secondly, as Mr Bathurst put it, NRMA’s primary proposition did not depend on “the accident of these particular provisions being inserted in the objects clause”. NRMA’s argument was that, when it came to powers (like objects), “to the extent possible, constitutions of any company should be clear”. In other words, NRMA’s contention was that Lord Wrenbury’s comments were applicable, not only to the objects clause in the memorandum, but to all provisions of the constitution that deal with the powers of the company (wherever they appear).
I turn firstly to the degree to which Lord Wrenbury’s remarks in Cotman v Brougham apply to the resolutions in issue in this case.
Those remarks (which I have quoted above) were concerned solely with the objects of the company as stated in its memorandum; the point being, according to his Lordship, that the reader of the memorandum must be able to “identify the field of industry within which the corporate activities are to be confined”. The proposed resolutions do not in any way affect the identification of the field of industry within which NRMA’s activities are to be confined.
Taking Lord Wrenbury’s remarks at face value, it seems that his Lordship was propounding a special rule applicable to the objects of a company when determining their validity. NRMA, on the other hand, contends for a special rule applicable to the determination of the validity of both the objects and powers of a company.
It is necessary to focus on the need for such a special rule.
One can readily appreciate the factors in favour of the Cotman v Brougham rule (relating to objects) being applicable to the objects of a corporation at a time when the ultra vires doctrine was of application. Lord Wrenbury said (at 522) that the rule had a twofold purpose, namely:
“The first is that the intending corporator who contemplates the investment of his capital shall know within what field it is to be put at risk. The second is that anyone who shall deal with the company shall know without reasonable doubt whether the contractual relation into which he contemplates entering with the company is one relating to a matter within its corporate objects.”
The idea that the constitution should inform the public with absolute precision of the field in which the company is to undertake its activities (Lord Wrenbury’s first purpose) is no longer of significance. This is the consequence of ss 124 and 125 of the Corporations Act. Section 124 provides that a company has the legal capacity of an individual. By s 125(2) an act of a company is not invalid merely because it is contrary to any of the objects in the constitution.
It follows, also, from ss 124 and 125, that, nowadays, a company is able to embark on new fields of endeavour untrammelled by objects clauses. Accordingly, the second of the purposes mentioned by Lord Wrenbury (that anyone who deals with the company should know without reasonable doubt whether the contract contemplated is within the company’s corporate objects) has fallen away.
As regards the need to define the powers of a company without ambiguity, s 124 provides that a company has the powers of an individual. While s125(1) provides that a constitution may contain an “express restriction” on, or a prohibition of, the company’s exercise of any of its powers, it also provides that “[t]he exercise of a power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company’s constitution”. Thus, it seems to me, there is no need for a rule as contended for by NRMA to protect outside parties who deal with the company.
Mr Bathurst submitted that if the powers of a company were not defined and identified in the constitution with clarity and without ambiguity there would be serious problems for directors, other officers and employees of the company who should be able to ascertain from the constitution what they can or cannot do.
In support of this submission, Mr Bathurst argued that, were the resolutions in their present form to be passed, the directors or other officers of the company could, unwittingly, readily act beyond power (that is, because of the inherent ambiguity of the proposed resolutions). They could face actions based on their breach of obligations to the company in circumstances where it would be difficult to know whether a breach had taken place or not. Moreover, the resolutions in question could form the basis of actions for oppression or for injunctions.
The ambiguity of the resolutions would be a weighty argument in the defence of claims against directors or other officers based on alleged negligence or breach of fiduciary duties resulting from acts that contravene the resolutions. I do not think that the resolutions would materially increase the susceptibility of directors or other officers to liability in respect of such claims. They may increase the number of claims made.
I accept that the ambiguity of the resolutions increases the prospects of NRMA having to face claims for injunctions arising out of alleged contemplated contraventions of their terms. Whether those prospects are to be regarded as real or significant is a matter of debate (see Ford, Austin and Ramsay, Ford’s Principles of Corporations Law (10th ed) at paras 6.120 and 8.280).
I also accept that the ambiguity of the resolutions increases the prospects of NRMA having to face claims alleging oppressive conduct against members.
The prospects of these resolutions, if they are passed, causing litigation, inconvenience and expense is readily apparent. This consequence, does not, however, in my view, warrant a rule that provisions in a company’s constitution defining and delimiting the company’s powers must be clear and unambiguous.
Complete lack of ambiguity in expression is virtually unattainable. If it were the law that provisions in a constitution relating to the powers of a company could be set aside on the grounds of ambiguity, an entire new litigation industry would be created. The orderly conduct of affairs would be disrupted, uncertainty in commerce and industry and related fields would be prevalent, there would be harmful delay in conducting company business and companies would have to bear significantly increased legal expenses. Moreover, undue burdens would be imposed upon the courts.
In my view, these factors, applicable to the community as a whole, far outweigh the difficulties that NRMA might experience should the resolutions be passed.
It also has to be borne in mind that the difficulties and prejudice that NRMA would incur should the resolutions be passed are self-evident. These matters can be avoided simply by the meeting rejecting the resolutions, or altering them in an appropriate way.
Leaving it to the meeting to resolve problems of this kind, where possible, has long been the approach of the courts. This is exemplified by Isle of Wight Railway Company v Tahourdin (1884) 25 Ch D 320. Cotton LJ said in that case (at 330-331):
“Now I am of opinion that if the object for which it is proposed to call a meeting is one which can be carried out in a legal way, then, although the notice may be so expressed that resolutions following its precise terms would be illegal, it is not right for the directors to limit the notice so as to prevent the meeting from entering into the question simply because the terms of the notice would justify a resolution which would be ultra vires. Directors have great powers, and the Court refuses to interfere with their management of the company’s affairs if they keep within their powers, and if a shareholder complains of the conduct of the directors while they keep within their powers, the Court says to him, ‘If you want to alter the management of the affairs of the company go to a general meeting, and if they agree with you they will pass a resolution obliging the directors to alter their course of proceeding.’”
Lindley LJ was of the same mind. He said (at 333):
“We must bear in mind the decision in Foss v Harbottle (1843) 2 Hare 461 and the line of cases following it, in which this Court has constantly and consistently refused to interfere on behalf of shareholders, until they have done the best they can to set right the matters of which they complain, by calling general meetings. Bearing in mind that line of decisions, what would be the position of the shareholders if there were to be another line of decisions prohibiting meetings of the shareholders to consider their own affairs? It appears to me that it must be a very strong case indeed which would justify this Court in restraining a meeting of shareholders.”
Lindley LJ went on to say (at 334) that he agreed that the notice of the meeting was “not happily worded” but remarked that a meeting would not be precluded from “passing resolutions substantially affecting the objects of the requisitionists in a way open to no objection on the score of illegality”. He concluded:
“It seems to me a very strong thing to say that the meeting shall not be held, because the notice is so wide that, according to its terms, illegal resolutions might be passed.”
Fry LJ agreed with both Cotton and Lindley LLJ.
In NRMA Limited v Snodgrass Mason P (at 387) cited Isle of Wight Railway Company v Tahourdin in accepting that curial restraint should be adopted “in construing notices of meeting and in precluding members from exercising such limited powers as they possess as regards company governance”.
Account must also be taken of the fact that the rule contended for by NRMA would not only be novel but would be against the weight of authority.
I would preface the discussion on this aspect by noting that in Cotman v Brougham, Lord Wrenbury said (at 522):
“The objects of the company and the powers of the company to be exercised in effecting the objects are different things. Powers are not required to be, and ought not to be, specified in the memorandum.”
His Lordship complained (at 523) about the “pernicious practice of registering memoranda of association which, under the clause relating to objects, contain paragraph after paragraph not specifying or delimiting the proposed trade or purpose, but confusing power with purpose and indicating every class of act which the corporation is to have power to do.”
In the present case, in accordance with the practice about which Lord Wrenbury complained, the resolutions seek to introduce in the objects clause provisions that do not concern the objects of the company but limit its powers. Mr Bathurst rightly accepted that no point could be made from the fact that the resolutions sought to amend the objects clause. He said, as I have mentioned, that the special rule for which he contended applied to the constitution as a whole and agreed that nothing turned on the fact that in Cotman v Brougham the clause in question was in the memorandum.
That being so, the historical approach of the courts to the construction of articles of association is instructive. The general principle is that laid down by Jenkins LJ in Holmes v Keyes [1959] Ch 199 (at 215) where his Lordship said the following:
““I think that the articles of association of the company should be regarded as a business document and should be construed so as to give them reasonable business efficacy, where a construction tending to that result is admissible on the language of the articles, in preference to a result which would or might prove unworkable.”
Holmes v Keyes was followed in Rayfield v Hands [1960] Ch 1 where Vaisey J, following In Re Hartley Baird Ltd (1955) 1 Ch 143 said (at 4) that the Court approaches articles on the basis that they should be “validate[d] if possible”. In Australia, Holmes v Keyes has been followed in Stillwell Trucks Pty Ltd v NectarBrook Investments Pty Ltd (1993) 115 ALR 294 (per O’Loughlin J at 300), Norths Ltd v McCaughan Dyson Capel Cure Ltd (1988) 12 ACLR 739 (per Young J at 746), and Tosichv Tosich Construction Pty Limited (1993) 10 ACSR 590 (per Lockhart J at 596). The Holmes v Keyes approach is consistent with the remarks of Barwick CJ in Upper Hunter at 436-437.
I would add that the decision of the Privy Council in Egyptian Salt & Soda Company Limited v Port Said Salt AssociationLimited [1931] AC 677 is contrary to NRMA’s argument. This case concerned the question whether the objects of the company, as contained in the memorandum, prohibited the company from exporting salt from Egypt. The trial judge held that the export of salt was inferentially excluded from the objects of the company. In doing so the judge said that the memorandum was to be construed “strictly”. Lord MacMillan, delivering the judgment of the Privy Council, said (at 682):
“If by this [the trial judge] meant merely that the memorandum must be construed in accordance with the accepted principles applicable to the interpretation of all legal documents no exception need be taken to his statement, but if he meant that a specially rigid canon of construction is to be applied to the memoranda of association of limited companies their Lordships do not agree. A memorandum of association like any other document must be read fairly and its import derived from a reasonable interpretation of the language which it employs.”
The finding by Lord MacMillan that it would be wrong to apply a “specially rigid canon of construction” to the memoranda of association of limited companies has to be seen in the light of the fact that these remarks concerned the objects of the company concerned. I do not see how the decision of the Privy Council in Egyptian Salt & Soda Company Limited can be reconciled with Cotman v Brougham. It is sufficient, however, to observe that Egyptian Salt & Soda Company Limited is fundamentally contrary to the proposition that there should be a special rule of construction relating to the powers of a company.
The fact that NRMA is a not for profit organisation does not in my view detract from the need to apply these long standing principles of construction to its constitution. NRMA is not a charitable organisation and I have pointed out that, in promoting the interests of motorists and providing its members with a range of services, it aims to do so in a businesslike and efficient manner whereby it, in effect, conducts a business for the benefit of its members. I would add that it is common knowledge that NRMA renders its services generally in competition with other commercial entities. Its constitution must be construed in this context.
I accept that it is in the interests of companies for their powers to be delimited and identified in a clear way. It does not necessarily follow, however, that provisions in a constitution that define or delimit such powers are void because they are not clear. It is ordinarily a matter for the company to determine its powers and how those powers are to be defined.
In my view, mere ambiguity (not constituting uncertainty) in expression in defining and delimiting the powers of a company is insufficient reason to hold that the defining and delimiting provisions are invalid. It may be that the company, its members and directors, as a matter of practical business, should not agree to such provisions or should vary them. But that is a matter for them, not the courts. If they wish to operate pursuant to ambiguous powers (which are not uncertain), it is open to them to do so.

In my opinion, to paraphrase Jenkins LJ in Holmes v Keyes, the NRMA constitution should be regarded as a business document and should be construed so as to give it reasonable business efficacy where a construction tending to that result is admissible on the language of the constitution, in preference to a result which would or might prove unworkable. The preponderance of authority and the other policy factors to which I have referred, are in favour of validating if possible.
Accordingly, I conclude that the submission that provisions in the constitution of a company, that define or limit or otherwise affect the powers of the company, are valid only if they are not ambiguous, cannot be sustained.
The uncertainty argument
NRMA contends, in the alternative, that his Honour erred in holding that the resolutions were not void for uncertainty (that is, applying the Upper Hunter test).
In regard to the Upper Hunter test, I agree with the approach of Campbell J, which I have referred to in [27].
Mr Bathurst quite properly accepted that a resolution would not be held to be incapable of meaning “merely because the ingenuity of somebody could postulate hypothetical circumstances where the clause would not work”. He submitted:
“[I]f one can look at a clause and say as a matter of generality it is impossible to see how the clause would work in any given case, then one is at the other end of the scale.”
The approach adopted by Vaisey J in Rayfield v Hands is consistent with this submission and that is how Campbell J approached the task he was required to undertake. I accept that this Court should determine the issue in the same way.
Campbell J concluded in regard to the first resolution that all the difficulties to which NRMA pointed were capable of resolution by a court. His Honour said then turned to the second resolution and, after examining its provisions, concluded again that it was not uncertain in accordance with the criterion for uncertainty laid down by the Upper Hunter test.
In construing the resolutions I bear in mind the following remarks of Lord MacMillan in Egyptian Salt and Soda Company Limited (at 682):
“It must be borne in mind that the purpose of the memorandum is to enable shareholders, creditors and those who deal with the company to know what is its permitted range of enterprise, and for this information they are entitled to rely on the constituent documents of the company. They have not access to other sources of information such as the antecedent transactions which the learned judge invokes, and have no means of knowing, for example, ‘that the intention of the promoters that the company should not export salt was known to the defendant company,’ a circumstance which the learned judge adduces. The intention of the framers of the memorandum must be gathered from the language in which they have chosen to express it.”
In Bratton Seymour Service Co Ltd v Oxborough [1992] BCLC 693 it was held that the articles of association of a company constitute a statutory contract with its own distinct features. For example, it could not be rectified on the ground of mistake (Scott v Frank F Scott(London) Ltd [1940] Ch 794, CA). Whereas the court might be able to infer a term purely by way of construction or implication, it is not possible to go further and to imply a term from extrinsic circumstances.
Steyn LJ said (at 698):
“Here, the company puts forward an implication to be derived not from the language of the articles of association but purely from extrinsic circumstances. That, in my judgment, is a type of implication which, as a matter of law, can never succeed in the case of articles of association. After all, if it were permitted, it would involve the position that the different implications would notionally be possible between the company and different subscribers. Just as the company or an individual member cannot seek to defeat the statutory contract by reason of special circumstances such as misrepresentation, mistake, undue influence and duress and is furthermore not permitted to seek a rectification, neither the company nor any member can seek to add to or to subtract from the terms of the articles by way of implying a term derived from extrinsic surrounding circumstances.”
Dillon LJ was of the same view.
Sir Christopher Slade agreed subject to the qualification expressed as follows (at 699):
“I accept that, in construing the articles of association of a company, evidence of surrounding circumstances may be admissible for the limited purpose of identifying persons, places or other subject matter referred to therein. Mr Asprey, however, has not invoked extrinsic evidence of surrounding circumstances in the present case for that limited purpose. He has sought to invoke it for the purpose of imposing additional financial obligations on the members far beyond those which the language of the articles of association of the company, read fairly on its own, would impose on them, because, he says, such an implication is required to give the articles business efficacy. No authority has been cited to us which begins to support the proposition that extrinsic evidence is admissible for that wide purpose in construing the statutory contract created by the articles of association of a company. In my judgment, the admission of such evidence for such purpose would be quite contrary to the principles governing this type of statutory contract.”
In Australia, Scott v Frank Scott (London) Ltd was followed by Rath J in Santos Ltd v Pettingell (1979) 4 ACLR 110. Hodgson J, in Simon v HPM Industries Pty Limited (1989) 15 ACLR 427 also concluded that the remedy of rectification is not available in relation to articles of association of a company.
In my view, the approach laid down in Egyptian Salt and Soda Company Limited and Bratton Seymour Service Co Ltd v Oxborough should be followed.
I turn now to the terms of the first resolution.
Mr Bathurst submitted that the phrase “current working conditions” has an ambulatory effect. He said that it was not clear whether the phrase referred to the time the resolution was passed, or from time to time, or the third possibility, mentioned by Campbell J, namely, the date of delivery of the requisition. In my view, on the Upper Hunter test, and applying the approach of “validating if possible”, the meaning of the phrase could be determined by the court (as Mr Bathurst fairly accepted).
Mr Bathurst then raised the issue of the phrase “current working conditions”. He said:
“Does it mean the working conditions to which road patrol officers are actually legally entitled, or does it mean the conditions which they actually enjoy in practice? If it’s the latter there is very great difficulty in identifying what those conditions are with any certainty or precision.”
Mr Bathurst submitted that the difficulties in identifying the conditions stemmed from the fact that there would be a whole range of different officers working on different rates and on different conditions, irrespective of whether or not, legally, their award treats them equally.
I accept, again, that it would not be an easy task to identify what is meant by the phrase “current working conditions”. Nevertheless, I consider that it would be possible for a court to determine the meaning of the phrase.
Mr Bathurst then referred to the words “are not disadvantaged in the provision of such service by having their current working conditions undermined”. He asked, rhetorically, how one could determine whether the conditions were “undermined”. Mr Bathurst posed a situation where some patrol officers worked an eight hour day with an hour off for lunch and where the company proposed to change that to a nine hour day with an hour off for lunch, with an increment in pay. He asked rhetorically whether that would amount to an undermining of working conditions.
Again, I accept that the questions are difficult to answer. But I see no reason, where there are a number of possibilities open to the court in determining the meaning of the words, why the court should not conclude that the meaning which best satisfies the Upper Hunter test should be adopted.
Mr Bathurst submitted that the difficulties were exacerbated by the qualification “are not disadvantaged in the provision of such services”. He asked rhetorically:
“Does that mean that the patrol officers are not worse off, or in some way that it’s more difficult for them to provide the services.”
Once more, it would be possible for a court to arrive at a formula that would resolve the problems raised.
Mr Bathurst submitted that it might well be that if only one of the problems existed a Court might be able to resolve it. He submitted, however, that the totality of the problems were such that they made the first resolution so vague “as to be impossible to put any real meaning as to what it’s intended to do”.
I do not think that this submission can be sustained. It does not matter if a clause contains a series of ambiguities, provided that each can be resolved. The mere fact that a clause contains many ambiguities does not mean that it is inherently uncertain.
Campbell J said in regard to the first resolution:
“All the difficulties which NRMA has pointed to concerning the first resolution are ones which, it seems to me, are capable of resolution by a Court. The construction of the object which the first resolution seeks to introduce will undoubtedly provide occasions for difficulty. I can see the possibility of an argument that the fact that there are so many occasions for difficulty inherent in it means that it is not the wisest course to include such a clause in the objects of the company. But that is a different question to whether, if included, it would be void for uncertainty.”
I agree with his Honour’s observations.
I turn now to the second resolution.
Mr Bathurst pointed to the fact that the second resolution does not provide any criteria for determining what amounts to “fair and equitable remuneration and working conditions” for “all employees”. He submitted that there were no criteria to suggest how the Court could determine what was fair and equitable remuneration to employees along the whole range of activities that NRMA engages in. For example, he asked rhetorically what would happen if the opposing contentions were between a minimum wage as determined by the Industrial Relations Commission and the wage paid to patrol officers in another State. Mr Bathurst submitted that no criteria existed by which a court could resolve the issue that would then arise.
This argument was put to Campbell J who answered as follows:
“I would readily accept that it would be necessary, in construing the object set out in the second resolution, to decide what is the criterion by reference to which it is seeking to say discrimination cannot occur. However, I do not see that task as one which is inherently incapable of being performed, difficult as it might be to actually perform it.”
I agree with his Honour’s remarks.
The other complaints NRMA raises concerning the second resolution are along similar lines. NRMA submits that the resolution does not provide any criteria for determining whether a working “package” “discriminate[s]” against existing Option 3 patrol officers. NRMA also submits that the resolution fails to identify criteria of relevant difference. Finally, NRMA submits that the resolution is internally contradictory because, in order to determine fair remuneration for all employees, it is necessary to distinguish (that is, it is submitted, discriminate) among them, including Option 3 patrol officers.
As Campbell J pointed out, the law is familiar with the use of the concept of non-discrimination as a test for actions. See Street v Queensland BarAssociation (1985) 168 CLR 461 (at 571 per Gaudron J and 581 per McHugh J). I see no reason why a court should not be capable of construing “discriminate” (as the term is used in the second resolution) by reference to criteria which are reasonable and in accordance with the business efficacy test. It is not necessary to have regard to extrinsic circumstances to determine such criteria. Such criteria are capable of being formulated on the basis that the mere drawing of a distinction between patrol officers does not necessarily give rise to “discrimination”. Therefore, I am not persuaded by the submissions advanced on NRMA’s behalf.
NRMA criticised Campbell J’s reasons, generally, on the ground that, while concluding that a court could perform the task of construction, he did not provide an answer to the several questions posed. In my view his Honour was quite correct in the approach he adopted. It is not necessary and in fact undesirable for the Court, in these proceedings, to attempt to answer the hypothetical questions posed. It is sufficient if the Court considers that the question is reasonably capable of resolution: see Rayfield v Hands; Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101.
I would not uphold NRMA’s submissions in regard to the uncertainty issue.
Disposition
I would dismiss the appeal with costs.
BRYSON JA: I agree with Ipp JA. It is not my intention to limit any future decision on the construction or the effect of the proposed resolution if it becomes part of the constitution of NRMA. In my understanding disposition on the grounds stated by Ipp JA will not have any such effect.
The respondent objected to the competency of the appeal. Failure to obtain the declaration which NRMA claimed established that NRMA is obliged to hold a special general meeting, the cost of which is in the order of $3.75 million. The order refusing the declaration is a final judgment which indirectly involves a question respecting a civil right of the value of more than $100,000: the civil right is NRMA’s claimed right not to hold a special general meeting. If leave were necessary it should be granted, as the question under appeal is of importance to a large section of the community. The activities of NRMA are so pervasive as to be part of the general organisation of society in New South Wales, and the terms of its constitution are matters of public interest. For this reason I joined in the Court’s decision to grant leave if necessary. However in my opinion the appeal is brought as of right.

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LAST UPDATED: 25/05/2004