Raja v DARUL-IMAN (WA) Incorporated [No 2]
[2011] WASCA 251
•17 NOVEMBER 2011
RAJA -v- DARUL-IMAN (WA) INCORPORATED [No 2] [2011] WASCA 251
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASCA 251 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:120/2010 | 20 OCTOBER 2011 | |
| Coram: | MARTIN CJ NEWNES JA MURPHY JA | 17/11/11 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed Stay granted | ||
| A | |||
| PDF Version |
| Parties: | FAYYAZ AHMAD RAJA DARUL-IMAN (WA) INCORPORATED |
Catchwords: | Interlocutory appeal Application to stay action on grounds of irregularity Order 12 r 6 Rules of the Supreme Court 1971 (WA) Incorporated association Persons who instructed solicitors lacked authority |
Legislation: | Associations Incorporation Act 1987 (WA), s 15(1) Rules of the Supreme Court 1971 (WA), O 12 r 6 Supreme Court Act 1935 (WA), s 60(1)(f) |
Case References: | ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd (receivers and managers appointed) (1991) 2 Qd R 360 Australian Workers Union v Bowen [1946] HCA 24; (1946) 72 CLR 586 Banco de Bilbao v Sancha [1938] 2 KB 176 Danish Mercantile Co Ltd v Beaumont [1951] Ch 680 Doulaveras v Daher [2009] NSWCA 58 John Alexander's Clubs Pty Ltd v White City Tennis Club Pty Ltd [2010] HCA 19; (2010) 241 CLR 1 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 Ox Operations Pty Ltd v Land Mark Property Developments (Vic) Pty Ltd (in liq) [2007] FCA 1221 Re Manias; Ex parte Edsill Pty Ltd (1986) 15 FCR 1 Tiao v Lai [No 2] [2010] WASCA 189 Victoria Teachers Credit Union Ltd v KPMG [2000] VSCA 23; (2000) 1 VR 654 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : RAJA -v- DARUL-IMAN (WA) INCORPORATED [No 2] [2011] WASCA 251 CORAM : MARTIN CJ
- NEWNES JA
MURPHY JA
- Appellant
AND
DARUL-IMAN (WA) INCORPORATED
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : DARUL-IMAN (WA) INCORPORATED -v- RAJA [2010] WASC 299
File No : CIV 1241 of 2005
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Catchwords:
Interlocutory appeal - Application to stay action on grounds of irregularity - Order 12 r 6 Rules of the Supreme Court 1971 (WA) - Incorporated association - Persons who instructed solicitors lacked authority
Legislation:
Associations Incorporation Act 1987 (WA), s 15(1)
Rules of the Supreme Court 1971 (WA), O 12 r 6
Supreme Court Act 1935 (WA), s 60(1)(f)
Result:
Appeal allowed
Stay granted
Category: A
Representation:
Counsel:
Appellant : Mr R J Nash
Respondent : Mr S K Shepherd
Solicitors:
Appellant : Arns & Associates
Respondent : Tottle Partners
Case(s) referred to in judgment(s):
ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd (receivers and managers appointed) (1991) 2 Qd R 360
Australian Workers Union v Bowen [1946] HCA 24; (1946) 72 CLR 586
Banco de Bilbao v Sancha [1938] 2 KB 176
Danish Mercantile Co Ltd v Beaumont [1951] Ch 680
Doulaveras v Daher [2009] NSWCA 58
John Alexander's Clubs Pty Ltd v White City Tennis Club Pty Ltd [2010] HCA 19; (2010) 241 CLR 1
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News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410
Ox Operations Pty Ltd v Land Mark Property Developments (Vic) Pty Ltd (in liq) [2007] FCA 1221
Re Manias; Ex parte Edsill Pty Ltd (1986) 15 FCR 1
Tiao v Lai [No 2] [2010] WASCA 189
Victoria Teachers Credit Union Ltd v KPMG [2000] VSCA 23; (2000) 1 VR 654
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- REASONS OF THE COURT:
Introduction
1 This is an appeal from an interlocutory decision of the master dismissing an application by the appellant (the defendant below) to have the substantive action struck out or dismissed.
2 The respondent (the plaintiff below) commenced the substantive action on 2 March 2005, seeking specific performance of an alleged contract for the sale, by the appellant to the respondent, of certain land. On 29 June 2005, the appellant entered a conditional appearance and made the application on 13 July 2005, pursuant to O 12 r 6 Rules of the Supreme Court 1971 (WA) (the Rules), to have the action struck out or dismissed on grounds that the action was not commenced with the authority of the respondent. The master dismissed the application.
3 The appellant requires leave to appeal pursuant to s 60(1)(f) Supreme Court Act 1935 (WA). Further, as the appeal was lodged out of time, the appellant seeks an order granting extension of time within which to appeal. On 24 November 2010, Pullin JA ordered that the applications for leave, and for an extension of time, be referred to the hearing of the appeal.
4 It should be observed at the outset that the hearing before the master took place over an inordinately protracted period of time. The chambers summons was filed on 13 July 2005. The hearing commenced with three sitting days in the first half of 2006 before being adjourned sine die for a period of almost three years, and concluded with another three sitting days spread throughout 2009. The master's reasons for decision were published on 28 October 2010, bringing the interlocutory application to a conclusion (subject to this appeal) some five years after it was commenced. The hearing is said to have taken the course it did as a result of a combination of various difficulties with witnesses, translators and obtaining hearing dates. These factors may, in part, explain the delay, but cannot justify it. The delay which occurred is objectively egregious and quite unacceptable in the administration of justice in this court.
Background and the hearing before the master
5 The respondent association was incorporated on 5 March 1992 pursuant to the provisions of the Associations Incorporation Act 1987 (WA) (the Act). According to its constitution, it is a non-profit association the objects of which are, in effect, to encourage and promote
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- Islamic education and the religious, social and educational interests of Muslims in Australia.
6 There are two rival member groups who both claim to control the respondent. Representatives of each gave evidence at the hearing before the master. The master referred to these two groups as the 'Ahmed Group' and the 'Omar Group'. We will adopt the same nomenclature.
7 The Ahmed Group comprises Mr Imtiaz Ahmed (Mr Ahmed), the appellant (Mr Fayyaz Ahmad Raja) (Mr Raja), and various others. Mr Ahmed asserts that he is the president of the respondent, and that he and various other members of the Ahmed Group were elected as 'office bearers' of the respondent at an annual general meeting held on 3 October 2004. The Ahmed Group asserts that it controls the respondent and that it did not instruct the respondent's lawyers (the lawyers) to commence the substantive action. On this basis, the appellant (Mr Raja), sought to have the substantive action struck out or dismissed.
8 The Omar Group comprises Mr Abdul Sulaiman Bin Omar (Mr Omar), Mr Abdullah Ahmad Saaid (Mr Abdullah), and various others. Mr Omar asserts that he is the president of the respondent, and that he and various other members of the Omar Group were elected 'office bearers' of the respondent at an annual general meeting held on 10 October 2004. The Omar Group asserts that it lawfully controls the respondent and that it instructed the lawyers to commence the substantive action. The Omar Group caused the respondent to resist the application before the master.
9 In substance, the appellant submitted that the evidence before the master demonstrated that the annual general meeting purportedly held by the Omar Group on 10 October 2004 was invalidly called, and that all appointments and resolutions made at that meeting were invalid. It contended, therefore, that the Omar Group did not have authority to retain the lawyers, that the retainer was therefore invalid, and that the action was improperly commenced.
10 At the hearing, Mr Omar said, in effect, that the Omar Group's authority to instruct the lawyers came from the meeting on 10 October 2004. The respondent, through the Omar Group, disputed that the meeting of 10 October 2004 was not validly called. It said further that even if the master were to find that the Omar Group lacked authority to instruct the lawyers, the retainer of the lawyers was nevertheless valid and enforceable pursuant to s 15(1) of the Act. Section 15(1) provides, in
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- effect, that a contract made with an incorporated association which lacks the legal capacity to enter into, or carry out, the contract, will be valid, unless the person contracting with the association had actual notice of the lack of capacity.
11 The master's reasons are in some respects cryptically expressed, but it appears that he made, in substance, the following relevant findings:
• the Omar Group instructed the lawyers, purportedly on the basis of the authority derived from the 10 October 2004 meeting: [5(a)], [6], [26], [37];
• the annual general meeting held on 10 October 2004 was not properly called, meaning that the Omar Group were not properly elected to their respective positions and did not have actual authority to act on behalf of the respondent to instruct the lawyers to commence the action: [6], [37];
• the lawyers, in commencing the action, did not have the authority of the respondent: [6], [26], [37], [38];
• the respondent and the lawyers entered into the contractual arrangement in circumstances where the lawyers did not have actual notice of the want of authority of the Omar Group, therefore the contract is valid by s 15(1) of the Act, and there are, consequently, no grounds to stay the action: [12], [26].
12 The master, to some extent, recognised, but understated, the difficulties associated with his conclusion that the lawyers did not commence the action with the authority of the respondent. He said [38]:
That conclusion leaves the plaintiff's present solicitors in a difficult position. They now have actual knowledge of the lack of authority of the individuals purporting to instruct them on behalf of the Association. At the same time, they have a retainer which requires them to represent the plaintiff's interests in this litigation and entitles them to payment for their services. Accordingly, while I would not stay these proceedings on the present application, there is, I think, a real question as to how the matter should proceed hereafter.
The grounds of appeal
13 The appellant relies on two grounds of appeal.
14 Ground 1 alleges, in effect, that the master erred in failing to dismiss or, alternatively, stay the action, in light of his Honour's finding that the
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- Omar Group were not authorised to instruct the lawyers on behalf of the respondent.
15 Ground 2 alleges, in effect, that the master erred in treating the lack of authority of the Omar Group as a deficiency of 'capacity' on the part of the respondent, which was ameliorated by s 15 of the Act.
Disposition of the appeal
16 The grounds of appeal should be upheld.
17 Once a court is satisfied that an action was commenced without the authority of the person or body whose name appears as plaintiff, the proper course is for the court to strike out or stay the action: Australian Workers Union v Bowen [1946] HCA 24; (1946) 72 CLR 572, 586, 5926, 592; Banco de Bilbao v Sancha [1938] 2 KB 176, 192 - 193; Doulaveras v Daher [2009] NSWCA 58 [103] - [104], [149].
18 With respect to the master, the question of the respondent's 'legal capacity' to enter into a retainer with the lawyers, and the applicability of s 15(1) of the Act, were irrelevant to the disposition of the application. There was no issue concerning the respondent association's capacity to retain lawyers for the purposes of the association. The issue was one of authority, and not whether the retainer was ultra vires in either the 'wide' or 'narrow' sense of that term (as to which, see ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd (receivers and managers appointed) (1991) 2 Qd R 360, 369 - 371). Counsel for the respondent conceded as much at the hearing.
19 Counsel for the appellant submitted that this court should allow the appeal and order a stay of the action, pending determination of the question of who constitutes the members and office bearers of the respondent. That is clearly the most appropriate course and, subject to the point raised in the notice of contention (discussed below), it was not seriously resisted by counsel for the respondent.
The notice of contention
20 The respondent filed a notice of contention which contended, in effect, that the master erred in finding that the Omar Group does not have authority to act on behalf of the respondent, in that the finding affected the interests of members of the respondent who were not joined as parties to the proceedings.
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21 In response, the appellant says, in effect, that as it did not seek resolution of the question of who constituted the membership of the respondent, and the master did not determine the answer to that question, it was 'neither necessary nor practical' for all of the members to be joined as parties to the proceedings, particularly where no members sought to be joined.
22 Where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined: John Alexander's Clubs Pty Ltd v White City Tennis Club Pty Ltd [2010] HCA 19; (2010) 241 CLR 1 [131].
23 In general, if a court makes an order affecting a person who should have been joined as a necessary party, that person is entitled to have the order set aside, and is not merely limited to seeking the favourable exercise of a discretion, whether or not the person in question becomes a party: John Alexander's Clubs v White City Tennis Club [137]; News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410, 527; Tiao v Lai [No 2] [2010] WASCA 189 [116].
24 The fact that a party is aware of proceedings and does not seek to be joined as a party does not alter the position; there is no duty on parties to seek to be joined: John Alexander's Clubs v White City Tennis Club [140]; News Ltd v Australian Rugby Football League Ltd (526).
25 In all of the above cases, orders were made which had a direct impact on the rights of third parties who were not made parties to the proceedings.
26 However, unlike those cases, the only order sought by the appellant before the master below was an order that the action be struck out or dismissed, on grounds that the action was commenced without the authority of the respondent. The appellant did not seek, nor did the master make, any order or declaration concerning the membership of the respondent, or as to who currently constitutes the office bearers. The master's finding would certainly not bind persons who were not parties before the master who would be necessary and proper parties in any subsequent proceedings in which the court was asked to determine conclusively the question of the membership and identity of the office bearers of the respondent.
27 Accordingly, the notice of contention should be dismissed.
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28 At the hearing, counsel for the respondent, nevertheless, ventured to suggest that the notice of contention also contained an allegation to the effect that there was evidence before the master upon which the master should have found that, notwithstanding the lack of authority on the part of the Omar Group, Mr Omar and Mr Abdullah remained validly appointed office bearers pursuant to an annual general meeting held sometime prior to 2004, and that they had, on that account, authority to instruct the lawyers on behalf of the respondent.
29 The notice of contention plainly did not raise that allegation. When pressed, counsel for the respondent conceded that the point was not raised in the notice of contention, but said that it was mentioned in submissions in response to the appeal.
30 It is correct to say that the written submissions referred to evidence that Mr Omar and Mr Abdullah were office bearers elected at a meeting on 13 May 2001. The written submissions made no attempt to elucidate how it is said that two office bearers alone had authority to act on behalf of the respondent, particularly in light of cls 14, 15 and 16 of the respondent's constitution (the details of which are not necessary to set out for present purposes). Counsel said that he was not able to advance the submission any further than what was contained in the written submissions.
31 The point apparently sought to be raised by counsel for the respondent is manifestly ill-developed, is not the subject of the notice of contention and is not appropriate for determination in this appeal. The hearing before the master had as its focus the alleged meetings on 3 October 2004 and 10 October 2004. The determination of wider questions of authority will inevitably involve additional evidence and other parties, and is properly left for another day.
Conclusion and orders
32 The litigation has now been on foot for almost seven years with very little, if any, progress having been made towards the final resolution of the matter because, in substance, the question of who is in control of the respondent remains unresolved. Until that issue is resolved, the litigation itself is pointless because, as was pointed out in the course of argument, even if specific performance were ordered, the respondent could not execute the transfer or deploy its assets in the purchase of the property, other than through the agency of a person or persons with lawful authority under its constitution to do so.
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33 This observation highlights the futility of the course which these proceedings have been allowed to take to date. More than six years have elapsed since the question of whether the Omar Group had authority to instruct the lawyers in 2004 was first raised. Resolution of that question could never, however, necessarily be determinative of whether the respondent could proceed with the action. That is because an action, though brought without authority, is not a nullity in the sense that it is void ab initio without the possibility of subsequent ratification. Ratification, once effective, relates back to the date of the institution of the action: Danish Mercantile Co Ltd v Beaumont [1951] Ch 680; Ox Operations Pty Ltd v Land Mark Property Developments (Vic) Pty Ltd (in liq) [2007] FCA 1221 [2]; Re Manias; Ex parte Edsill Pty Ltd (1986) 15 FCR 1; Victoria Teachers Credit Union Ltd v KPMG [2000] VSCA 23; (2000) 1 VR 654, 662, 664.
34 Further and in any event, as we have just observed, in order for these proceedings to have any continuing utility, it is necessary to establish who currently has lawful authority to direct the affairs of the respondent association. It follows that ever since the appellant asserted that the proceedings had not been commenced with the authority of the respondent association, the more significant issue was which group currently has lawful authority to direct the affairs of the respondent association, rather than the question of which group had that authority in 2004.
35 Because the focus of the parties was only upon the question of authority to commence proceedings, no evidence was led, nor were any findings made by the master with respect to the question of authority to control the respondent association over the years which have elapsed since the proceedings were instituted. Consequently, it is not possible for this court to make any findings on that subject, which would be critical to the question of whether the commencement of the proceedings can now be ratified, and as to their future utility.
36 The course which these proceedings have been allowed to take is not consistent with O 1 r 4A of the Rules, which requires the adoption of procedures and processes which have as their goal the elimination of any lapse of time from the date of initiation of proceedings to their final determination beyond that reasonably required for interlocutory activities essential to the fair and just determination of the issues bona fide in contention between the parties. Nor is it consistent with the systems of case-flow management required by O 1 r 4B of the Rules. Once it was clear that the appellant had established an arguable case in support of the proposition that the proceedings had been instituted without the authority
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- of the respondent association, and that establishing the true facts was likely to require a substantial hearing, the better course would have been to adjourn the application, and temporarily stay the proceedings while establishing a timetable for the commencement of properly constituted proceedings, to which all necessary parties are joined, for the purpose of determining who currently has the lawful authority to direct the affairs of the respondent association and the attitude of those persons with respect to the continuation of the proceedings. That is essentially the point we have now reached, more than six years later.
37 We would grant the appellant the extension of time sought, grant leave to appeal and allow the appeal. Subject to hearing from the parties as to the precise terms, we would order that the action be stayed pending determination of the membership and current office bearers of the respondent. The appellant should also be given liberty to apply to have the action dismissed if proceedings to determine those matters are not commenced within an appropriate time. For this purpose, and subject to hearing further from the parties, an appropriate time might be, for example, three months from the date of this judgment. Any such action should be brought into the CMC List.
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