Re: The Newcastle Master Builders’ Association [2023] NSWSC 868

Supreme Court New South Wales

Medium Neutral Citation: Re: The Newcastle Master Builders' Association [2023] NSWSC 868 Hearing dates: 4 July 2023 Date of orders: 4 July 2023 Decision date: 04 July 2023 Jurisdiction: Common Law Before: Walton J Decision: The Court makes an order pursuant to s 227(1) of the Industrial Relations Act 1996 (NSW) that the registration of the Newcastle Master Builders' Association as an industrial organisation be cancelled effective from Monday 10 July 2023. Catchwords: EMPLOYMENT AND INDUSTRIAL LAW – Industrial organisation – Cancellation of registration under s 227 of the Industrial Relations Act 1996 (NSW) Legislation Cited: Industrial Relations Act 1996 (NSW), ss 225, 226, 227, 228 Category: Principal judgment Parties: Newcastle Master Builders' Association (Plaintiff) No defendant Representation: Counsel: J Burnett (Plaintiff) No defendant

Solicitors: Travis Partners (Plaintiff) No defendant File Number(s): 2023/180523

EX tempore JUDGMENT 1. By a Summons filed on 6 June 2023, the Newcastle Master Builders' Association ("the Association") moved this Court for two orders. The first order was that the Court, pursuant to s 227(1) of the Industrial Relations Act 1996 (NSW) ("the Act"), cancel the registration of the Association. The second order was that the Court should make such further or other orders as the Court considers appropriate. The application was supported by two affidavits of Barry Grainger, the Chairperson of the Association, dated respectively 30 May 2023 and 3 July 2023. 2. The Association is an industrial organisation of employers registered under the Act. The rules of the Association contain objects of a familiar kind. In Rule 6 of the Association's rules, those objects provide that the Association shall safeguard, by all lawful and proper means, the interests of the members of the Association in their regular business in the building and construction industry and protect the members of the Association in the fair and proper execution of such works as they may undertake from time to time. There are further aspects of the operation of the objects which are unnecessary to state for present purposes. 3. The rules of the Association provide that the management and control of the Association's affairs shall be vested on a Board which may, subject to the decision of the Association in a general meeting, exercise all such powers and do all such acts or things as may be exercised or done by the Association (Rule 23). The Board shall consist of 11 members, being seven building industry members and an Executive. 4. Rule 24 of the rules provides for the election of Executive Officers. Rule 24(a) provides for the election of a President. The President's powers and duties include, inter alia, Rule 24(a)(i), being responsible to the Board for the policy directions of the Association's affairs between Board meetings. 5. Rule 31 of the rules of the Association provides for general meetings of the Association. Rule 31(iii) provides requirements for such general meetings, but that sub-rule is made subject to the provisions of Rule 20 of the Association's rules. 6. Rule 20 of the Association's rules provides specifically for the winding up of the Association. In that respect the rule provides, in sub-rule 20(i), that subject to the provisions of the Act, where at least two-thirds of all members of the Board resolve that it is necessary or desirable that the Association should be dissolved or wound up, the Board shall prepare appropriate resolutions seeking approval for the dissolution or winding up of the Association, and the disposition of the remaining assets of the Association after payment of all debts which shall be put to a special general meeting of the Association. 7. Later, I will turn to various resolutions of the Board with respect to winding up, noting the Board voted unanimously in favour of the winding up of the Association. 8. Rule 20(ii) provides that a special meeting shall be convened in accordance with the provisions of Rule 29(iv), except, that at least 28 days' notice of the meeting shall be given to the members. The terms of the proposed resolutions must appear on the notice of the meeting. 9. Rule 20(iii) provides that a quorum for the special meeting shall be at least 50% of the financial industry and life members of the Association at the date of the meeting. It further provides that the resolution must be passed by at least 85% of the members personally present or represented by the members' nominated representative present at the meeting. 10. Rule 20(iv) provides that, if a quorum is not present within 30 minutes of the advertising meeting, the business of the meeting must be held over to a further special meeting to be called within 3 months of the failed meeting. Such a course was taken by the Association in this case. 11. The sub-rule then provides that the notice of the further meeting must include the terms of the proposed resolutions together with the following words which shall appear prominently in the notice: Members are advised that if a quorum is not present within 30 minutes of the advertised starting time for the meeting, the Board may make application to the Industrial Relations Commission of NSW [in] accordance with section 225 of the NSW Industrial Relations Act 1996 for the cancellation of the registration of the Association. A quorum for this meeting will be 50% of the total number of financial Industry and Life members of the Association as at the date of the meeting. 1. As counsel appearing for the Association in this matter, Mr Burnett, appropriately identified, the present application was made properly to this Court in accordance with the provisions under Div 2, Pt 3, Ch 5 of the Act. That course was taken after amendments to the Act which transferred the jurisdiction to deal with matters arising under Div 2 from the Industrial Court of NSW, to this Court. 2. I return to the subject rule, Rule 20(iv). In my view, the rule should be read with an ambulatory effect, so that the reference in the sub-rule to the Act in conjunction with a reference to the Industrial Relations Commission of NSW should be read so that, for all intents and purposes, the drafters of the rule intended the rule to incorporate amendments to the Act, or at least the operative components to which the rule attaches. The reference to the Industrial Relations Commission, being the Industrial Court of NSW, should therefore be construed as meaning this Court which holds the relevant jurisdiction under the Act, thereby bringing in, relevantly, this Court to the operation of the rules rather than the Industrial Relations Commission of NSW. The effect of construing the rule in that fashion is to give full effect to the intention of the rule maker so as to provide for the cancellation of the alteration, in accordance with the circumstances of the rule and the terms of the Act which have remained unaltered, save for the jurisdiction conferred in this Court. 3. No other reference to the Rules is presently required for the purpose of determining this application. 4. First, I deal with the procedural course which led to the making of the application and secondly, I deal with the grounds of the application and the particular factual background that bears upon the satisfaction of those grounds. 5. The affidavit of Mr Grainger of 30 May 2023 sets out the procedures adopted by the Association and, in particular, its Board. 6. On 7 September 2022, the minutes of the Board recorded a Special Board Meeting was convened. Additionally, on 7 September 2022, the minutes of a Meeting of Directors referenced part of the history of the Association leading up to 7 September 2022, and in particular to a restructure that has now been given effect resulting in the Association having no assets and no known debts as at the time of the Board meeting. It was resolved, in accordance with Rule 20 of the Association's rules, to wind up the Association and transfer any remaining assets to the Newcastle Master Builders Association Ltd. I note that the resolution was unanimous. There was also a resolution passed in the Director's meeting to call a Special General Meeting of members to approve the winding up of the Association and transfer any remaining assets to the Newcastle Master Builders Association Ltd (hereinafter "NMBA Ltd"). 7. I note for completeness, that it was also resolved in the Director's meeting that the Board was authorised to do all such things as may be necessary and desirable to give effect to such resolutions. In my view, that resolution should be read in conjunction with Rule 24(a), which provides that the President, otherwise described in the meetings to which I refer as the Chairperson, has also a certain capacity to give effect to determinations of the Board in that respect. 8. A Notice of the Special Meeting of Members was given for a meeting to be convened on 6 December 2022 which provided for Special Resolutions of the kind which I have described. The minutes of the Special Meeting convened on 6 December 2022 reveals that a quorum was not reached in the meeting convened. I note that Mr Grainger attended the meeting as Chairperson. The meeting was declared by him, properly in my view, to be informal and it was then decided that a further meeting would be convened within 3 months of the failed meeting in accordance with Rule 20 of the Rules of the Association. 9. Notice of such a meeting was provided by the Association. It is sufficient for present purposes to note that that notice contained within it a special notice, in addition to the resolutions proposed in the former meeting, consistently with the provisions of Rule 20(iv). That further meeting was convened on 21 February 2023 and resulted in a similar outcome to the previous meeting, namely, a quorum was not reached, and the meeting was declared informal. 10. The provisions of s 225(3) of the Act provide that an industrial organisation may apply for the cancellation of its own registration. In the present case, the mechanism provided under the Rules for such a step to be taken by the industrial organisation, namely, the conduct of a special general meeting, did not result in a formal resolution as could lawfully, by the carriage of the resolution, give effect to the determination of the Board of Directors to wind up the Association. 11. However, in my view, the provisions of s 225(3) of the Act are met in the present case for the following reasons: 1. The Directors, by the requisite majority, determined that there should be a winding up of the Association. 2. The notice of the second Special General Meeting made provision for an application for the cancellation of registration of the Association in accordance with Rule 20. 3. Rule 20 essentially created a self-executing mechanism whereby, upon the giving of the requisite notice for a (second) Special General Meeting, and in the absence of a quorum, voting in favour of a proposed resolution for cancellation of the Association, at a meeting so convened, the Association may proceed to winding up and make the requisite application for cancellation. 4. The Board then acted upon the provisions of the rules to make the present application by the Association. That inference may be drawn not only from the provisions and notice given with respect to Rule 20 of the Association's rules and by the unanimous previous resolutions of the Directors to take that course, but also by the affidavit of Mr Grainger who plainly gave instructions to take the steps that have been taken to seek the cancellation of the Association. 1. The application in the present matter is predicated upon three of the grounds available under the Act, namely, the grounds available under s 226(e), (f), and (g). In my view, each of those grounds are established in the present case, for reasons I will now outline, such as to provide for the conclusion that, under s 227(1) of the Act, the grounds for cancellation have been established. 2. It is unnecessary to decide whether a discretion resides in the Court under s 227 of the Act but, without passing final judgment upon the matter, it would appear to me that the Court would have a residue of discretion in that respect. That may be indicated at least by the provisions of s 227(2). In any event, for present purposes, I note that, if a Court did have a discretion to determine whether the Association's registration should be cancelled, it would exercise the discretion to do so. 3. I now turn to the background circumstances of the present application. In around 2005, the Association entered into a services agreement with the Master Builders' Association of New South Wales ("NSWMBA") pursuant to which the Association sub-contracted its industrial functions and other member services to NSWMBA. 4. By reason of the services agreement, the NSWMBA (rather than the Association) performed industrial functions for the members of the Association. Thus, the NSWMBA took over the representative capacity of the Association for the purposes of the Act. Nonetheless, the Board of the Association formed the view that the Association should still engage in local organisations to promote and develop the building industry in New South Wales and the Hunter Valley. The Board was anxious to ensure the fulfilment of the objects of the Association referable to the broader commercial and building interests of the members of the Association. 5. In those circumstances, on 12 April 2022 the Association and the Newcastle Master Builders' Association Limited ("the company") entered into a Deed of Restructure. I note this is the Deed of Restructure I referred to earlier in my judgment by reference to various meetings. The recitals to the Deed of Restructure recorded that: In order to secure the future of the promotion and development of the building industry in Newcastle and the Hunter Valley, the parties wish to undertake the Restructure on the terms of this deed. 1. The Deed of Restructure provided for the Association to transfer all of its assets and liabilities to the company. 2. Following the transfer of the Association's assets to the company, the Association had no assets. The Association's audited financial statements for the year ending 30 June 2022 confirmed that the Association had no assets and no liabilities. I also note the minutes of the Director's meeting of 7 September 2022, to which I earlier referred, declared that the Association had no debts. The members of the Association have become members of the company. 3. Whilst the objects of the company differ in some respects to those of the Association, I accept the submission of counsel for the Association that the objects of the company are substantially the same as the objects of the Association, albeit that the company is not an industrial organisation. 4. Counsel for the Association also contended that, in that light, the Chairperson of the Association formed the view that the Association no longer performed a useful function because the members' services are provided to the members by the NSWMBA and that the assets of the Association have been transferred to the company. 5. I note further that in my view, having regard to the determinations made by the Board of the Association, the Chairperson was entitled to form that view and to take steps in accordance with the determination of the Board, in consequence of rule 20, to make the application which he has in the form of a Summons to this Court. 6. There remains a determination of the application in accordance with the grounds relied upon by the Association. In his written submissions, counsel for the Association contended that the provisions of s 226(f) of the Act have been satisfied because the Association has applied for the cancellation of its own registration. I accept that submission, having regard to the determinations earlier made by me as to the effect and operations of the Association's rules and the steps taken by the Board and the Chairperson in the bringing of the present application. 7. Reliance is also placed upon the provisions of s 226(e) of the Act, namely, that the Association no longer effectively represented its members. In my view, that ground is also made good by virtue of the industrial services now provided to the members of the Association by the NSWMBA, effectively to the exclusion of the Association. 8. Finally, the Association relies upon the provisions of s 226(g), namely, that the organisation is defunct. In my view, whilst there is some long history of determinations by courts as to what is or is not a defunct organisation, in this case there can be no doubt that the organisation is for all relevant purposes, and as a matter of law, defunct. Members of the Association are now members of the company, which has substantially the same purposes as the Association. It no longer has any assets and liabilities and for all relevant purposes, save for the conduct of the present application, no longer has any effective industrial or other function. 9. As I have mentioned, there is an ample discretionary basis upon which the present application may be granted. In addition to the satisfaction of the grounds themselves, there appears to be ample provision made for the services provided to the members of the Association, both industrially and in terms of their broader interests, as reflected in the objects of the Association's rules. 10. Furthermore, the combined effect of the provision of services by the NSWMBA and the company are such that the members will at least benefit, to the extent they formerly have, from the services provided to them by the Association upon the evidence presently before the Court. There are no present liabilities identified in the records of the Association and therefore I may draw the conclusion that there are no relevant entities financially adversely affected by the cancellation of the Association. In any event, I note in that respect the operation of s 228 of the Act. 11. In the result the Court makes an order pursuant to s 227(1) of the Industrial Relations Act 1996 (NSW) that the registration of the Newcastle Master Builders' Association, as an industrial organisation, be cancelled effective from 10 July 2023.