New South Wales Supreme Court CITATION : KAPLANTZIS & ANOR v FEDERATION OF SAMIAN ORGANIZATIONS OF AUSTRALIA LTD & ORS [2001] NSWSC 1090 CURRENT JURISDICTION: EQUITY FILE NUMBER(S) : SC 3411/2001 HEARING DATE(S) : 16/11/2001 JUDGMENT DATE : 29 November 2001 Michael Kaplantzis - First Plaintiff Stavros Lerios - Second Plaintiff Federation of Samian Organizations of Australia Ltd - First Defendant PARTIES : Photios Vouroudis - Second Defendant Bill (Vassilis) Hatzivasiliou - Third Defendant Con (Kostas) Passas - Fourth Defendant Samian Brotherhood of Sydney & N.S.W. "O Lycourgos" Limited - Fifth Defendant JUDGMENT OF : Bryson J at 1 COUNSEL : G. McGrath - Plaintiffs L. Aitken & Ms F. Rogers - Defendants SOLICITORS : Konstan Lawyers - Plaintiffs Messrs H. Danalis & Co. - Defendants CATCHWORDS : CORPORATIONS - meetings - quorum - some members leave during meeting - incorporated social and community organizations - Articles of Federation (first defendant) entitled Brotherhood (fifth defendant) to appoint officers of Federation - plaintiffs claimed to have been appointed - Articles of Brotherhood provided for quorum of Committee - where eleven Committee members quorum was eight, where 10 quorum 7 - ten of eleven attended, three withdrew during the meeting, the plaintiffs' claim depended on the validity of a resolution passed by remaining seven. Issue whether absent member had vacated office through absences. It was found that there had been no decision to treat him as having vacated office, and there was no evidence that he was liable to vacation as he had not been given notice of meetings as required by Articles. Factual issues about the points of time at which the three withdrew. It was found that the three withdrew before the challenged resolution was passed. Held - the resolution was ineffecive for lack of a quorum - the plaintiffs' claim to hold office in Federation under the resolution failed. LEGISLATION CITED : s.1322 of the Corporations Act 2001 CASES CITED : Ball v. Pearsall (1987) 10 NSWLR 700 DECISION : Give judgment for the defendants with costs. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON J. THURSDAY 29 NOVEMBER 2001 3411/01 – MICHAEL KAPLANTZIS & ANOR v. FEDERATION OF SAMIAN ORGANIZATIONS OF AUSTRALIA LTD & ORS Judgment 1 HIS HONOUR: In these proceedings the plaintiffs seek to establish that the first plaintiff Mr Kaplantzis is the President and the second plaintiff Mr Lerios is the Secretary of the Federation of Samian Organizations of Australia Ltd (which is the first defendant). These offices are voluntary and unpaid. The affairs of the Federation and of the fifth defendant The Samian Brotherhood of Sydney and New South Wales O Lycourgos Ltd, referred to as "O Lycourgos" are not commercial; they are community and social organisations concerned with the interests of persons resident in Australia who were born or are descended from persons born on Samos, an island in the Aegean Sea and part of Greece. The first defendant is a federation of a number of organisations in several Australian States and the Australian Capital Territory; O Lycourgos is one of the members organisations, and its members in turn are individuals who live in New South Wales and are associated with Samos. 2 O Lycourgos and the other brotherhoods or State organisations elect the officers of the Federation by rotation, and in accordance with the Articles of Association and practices of the Federation; the opportunity to elect officers of the Federation for a two-year term fell to O Lycourgos about 9 or 10 January 2000. The office-holdings in issue in these proceedings are for a term of two years which will end about 10 January 2002, so the disposition of the present proceedings can have little practical effect. The plaintiffs claim to have become the President and Secretary of the Federation; two other persons could make a similar claim to be the Vice President and Treasurer of the Federation, but have not made any such claim and have not joined in this litigation. The plaintiffs have not achieved practical recognition as President and Secretary of the Federation or effective control of its affairs, as a rival group of officers including the second, third and fourth defendants Messrs Vouroudis, Hatzivasiliou and Passas, who were or purportedly were elected to be officers of the Federation by a later decision of the Committee of O Lycourgos, are in practical control of the Federation's affairs. There is no Cross-claim and the Court has not been asked to make a declaration confirming that these defendants hold office in the Federation. 3 The controversy is soon to pass out of practical significance when the right to appoint officers of the Federation passes to another brotherhood early in January 2002. It has not been made clear to me how rotation is determined, although there are suggestions in the evidence that the brotherhood next entitled to appoint Federation officers is the South Australian Brotherhood. It has also been suggested that in some way decisions have been made to put off the election of Federation officers for one year and extend the term of the present officers for one year. Any decision or purported decision to do that would not, on the face of the Articles of Association of Federation, be effective, and I will proceed on the footing that it would not be effective. However I am not in a position to give a binding decision on that subject. 4 The remaining term of office-holding by the plaintiffs if they were successful would be short, two other office-holders who could make the same claim have not made any claim, other persons have been in practical control of Federation affairs for over one and a half years, the present proceedings were not commenced until July 2001, and the overall importance of the dispute relates to social and community affairs and the personal dignity of office holders. In so far as any discretion fell to be exercised to come to a conclusion in this litigation, these facts, or some of them, would probably be quite important, and they would be adverse to intervention by the Court. However the grounds on which the litigation should in my opinion be disposed of are not discretionary. 5 The Articles of Association of the Federation provide for management by an Executive Committee which holds office for two years (Article 34), and the officers are to be the President, the Vice President, the Treasurer and the Secretary, all of whom must be members of the Presiding Member (Article 35); the position of Presiding Member and the headquarters of the Federation are transferred every second year (Article 10). The Executive Committee of the Federation comprises the four officers elected by the Presiding Member, and two representatives from each other member. Qualifications for the President are stated by Article 39 and they include that the President must not be a member of the Executive Committee of the Presiding Member. The four officers are to be nominated and elected by the Executive Committee of the Presiding Member (Articles 39 and 40). 6 The Articles of Association of O Lycourgos provide that the business of O Lycourgos shall be conducted by the Committee (Article 38) which can be clearly identified as the Executive Committee mentioned in the Articles of the Federation. The Committee can act notwithstanding vacancies so long as their number does not fall below nine (Article 40). Article 59 regulates meetings of the Committee; the Committee is to meet at least once every calendar month and there is a table fixing the quorum for each case where there are nine, ten, eleven, twelve or thirteen members. Australian Securities and Investments Commission (ASIC) records show that on 28 February 2000, the date of the meeting the effectiveness of which is in contention, there were eleven Committee members, and according to the table there was a requirement for a quorum of eight. If there were ten committee members the requirement according to the table was for a quorum of seven. Of the eleven committee members shown in the registered particulars, it is clear that ten were in attendance early in the meeting. If all eleven were still members, the continued presence of eight members was necessary to maintain a quorum. During the meeting three who had originally been in attendance left. Seven remained and voted for the election of officers including the plaintiffs. 7 The first issue is whether Mr Kostakos, who according to the registered particulars was a Committee member, had lost membership by the time the meeting began. If he had lost membership, there were ten members, the quorum was seven and a decision by the remaining seven would have been effective. If he had not lost membership the quorum was eight and a decision of the remaining seven would not have been effective. 8 The second issue is whether all three of the members who left the meeting had left before a decision was reached on the nominations for officers of the Federation. 9 No notice was given, before the Committee meeting of 28 February 2000, that there would be nominations or an election of officers of the Federation at that meeting. It was not the practice, nor was there a requirement in the Articles for a written agenda or notice of business to be circulated in advance. At a meeting of 17 January 2000 discussion and an observation of Mr Kaplantzis the first plaintiff indicated that there was a proposal that the nomination and election be put off until a new Committee of O Lycourgos had taken office; however there was no formal decision to adopt this procedure. By 28 February 2000 the election of a new committee of O Lycourgos had in some way been postponed. The position taken by the members who left the meeting, or by some of them, was to the effect that they had no idea that the appointment of officers of the Federation was to be considered on 28 February, and in particular that they had not expected that Mr Kaplantzis would be nominated as President of the Federation, for which he must first resign as President of O Lycourgos, because he had given indications earlier that he would not do this. There was clearly room for some members of the Committee to take the view that the proceedings on 28 February 2000 were very unsatisfactory, and to decline to participate; this is no less so because other members did not object. 10 Power to act for O Lycourgos is conferred by Article 62 of its Articles of Association in these terms: A duly convened meeting of the Committee for the time being at which a quorum is present shall subject to the Act and these Articles be competent to exercise all or any of the authorities powers or discretions by or under the Memorandum or Articles of the Company for the time being vested in or exercisable by the Committee generally. 11 It will be seen that the Committee is competent to act on behalf of O Lycourgos only if: - there is a duly convened meeting of the Committee for the time being, and - there is a meeting at which a quorum is present. 12 In my opinion the absence of a quorum cannot be treated as a procedural irregularity. The terms of Art.62 make the presence of a quorum an essential requirement for competence of a meeting of the Committee to exercise powers. No powers are conferred on a meeting at which a quorum is not present. The deficiency is a deficiency of substance, not of procedure: without a quorum there is no conferral of authority. The deficiency is not simply an irregularity: the terms of Art.62 make a quorum an essential part of the substance of conferral. 13 Convening a meeting and a quorum are dealt with by Article 59 which is in these terms: PROCEEDINGS OF THE COMMITTEE (a) Subject as hereinafter provided the Committee may meet together for the despatch of business adjourn and otherwise regulate its meetings and proceedings as it thinks fit. (b) The Committee shall meet once at least in every calendar month. Subject to any other number as is fixed by the Company in general meeting, a quorum of the Committee shall be:- (i) Where there are nine (9) members on the Committee: six (6) members; (ii) Where there are ten (10) members on the Committee: seven (7) members; (iii) Where there are eleven (11) members on the Committee: eight (8) members; (iv) Where there are twelve (12) members on the Committee: nine (9) members; (v) Where there are thirteen (13) members on the Committee: nine (9) members. (c) Four days' notice of every meeting of the Committee shall be given to each member of the Committee. (d) The accidental omission to give any notice or the non-receipt of any notice shall not affect the validity of the proceedings at the meeting. 14 It will be seen that: - the Committee may regulate its meetings and proceedings as it thinks fit, but shall meet at least once in every calendar month; - the quorum calculated in accordance with the table in Article 59(b) must be present if the Committee is to be competent, having regard to Article 62; - there is a mandatory requirement to give each member four days' notice of every meeting of the Committee. In some cases specified in Article 59(d) absence of notice does not affect the validity of proceedings; but it is no less true that a member is entitled to four days' notice. 15 If a member has not been given four days' notice there is no sense in which he is in default if he does not attend the meeting. If a member is given short notice and decides to attend he cannot I suppose complain about the short notice, but if a Committee member is given short notice and does not decide to attend, there could be no sense in which he was in any way in default. 16 Article 58 relates to disqualification and is in these terms: DISQUALIFICATION The office of any member of the Committee shall be vacated if he:- (a) holds any office of profit under the Company; or (b) becomes bankrupt; or (c) becomes prohibited from being a Director of a company by reason of any order made under the Act; or (d) becomes an insane patient or an insane or incapable person within the meaning of the Mental Health Act, 1958; or (e) resigns his office by notice in writing to the Company; or (f) ceases to be either a Regular Member or an Honorary Member of the Company; or (g) shall have been absent from two (2) consecutive meetings of the Committee without obtaining leave of absence; or (h) is directly or indirectly interested within the meaning of Section 123 of the Act in any contract with the Company or participates in the profits of any contract with the Company PROVIDED HOWEVER that such member shall not vacate his office by reason of his being a member of any corporation firm society or association which has entered into contracts with or done any work for the Company if such corporation firm society or association is among the class of companies referred to in the last proviso to Clause 4 of the Memorandum of Association of the Company and if he shall have declared the nature of his interest in manner required by Section 123 of the Act. 17 In my opinion not all of these grounds operate automatically to cause the office of a member of the Committee to be vacated. Some operate automatically as it cannot be open to doubt or discussion whether or not a person becomes bankrupt or becomes an insane patient, or resigns his office by notice in writing. There was evidence that, at some time early in February 2000 Mr Kostakos told Mr Cofinas, another Committee member that he was unwilling to come to meetings any more, and that he resigned. However he did not resign in writing, and nothing came of any stated intention to resign. For other grounds there may, according to circumstances, be grounds for consideration and decision before it is established that office holding has been vacated. Whether or not this is so for other grounds, it is in my opinion certainly so for Ground (g). In my opinion a Committee member would not lose office on Ground (g) unless the Committee had considered and come to a decision about whether or not Ground (g) had been fulfilled. To do that in an effective way it would be necessary to give the member a fair opportunity to state his position on whether or not Ground (g) had been fulfilled and whether or not he should have leave of absence. Unless that was done a purported vacation of office under Ground (g) would be voidable. On any reasonable construction of the Articles, Ground (g) cannot mean that office is vacated where a member has been absent on two consecutive meetings unless according to the workings of the Articles he should have been present at those two consecutive meetings. In the operation of Article 58(g) it must be assumed that other provisions of the Articles bearing on whether a Committee member should be present or absent have been complied with. The Articles do not expressly point out who may summon a meeting or make an appointment for a meeting of the Executive Committee; the position may be that any member of the Committee may give notice of a meeting of the Committee to each member. If the Committee had regulated its meetings by a decision under Article 59(a) making an appointment for a meeting, I would suppose that the appointment would have been effective. 18 It will also be seen that to reach the conclusion that Mr Kostakos was not a member and was not to be counted for calculating the quorum at the meeting of 28 February it must first be established that he vacated office before 28 February. No decision was taken on 28 February that his office was vacated. There is no evidence of any decision taken at any earlier time that his office was vacated. It is clear that there were several meetings on 17 January 2000 and later before 28 February at which he did not attend. However the registered particulars of membership appearing in the search of the ASIC records show him as continuing to be a member; they do not show any vacation of office, and in May 2000 and later he is again shown in Minutes as attending at meetings of the Executive Committee, unchallenged, in the character of a member. I find as a fact that no decision was ever taken establishing that he vacated office. 19 The evidence of Mr Diakogiannis, a Committee Member is to the effect that he was not, before 28 February 2000 aware of and was not given any notice of a meeting to be held in the evening of 28 February 2000 until he was told, in a conversation with Mr Karayiannidis, who was also a Committee Member, that there was a meeting that night. Mr Diakogiannis telephoned two other Committee Members, Mr Himonitis and Mr Sidirourgos and told each of them of the meeting; and each said to the effect that he had not been notified of it. He then rang Mr Kostakos, also a member of the Committee and said to him "I have learned that there is a Committee Meeting tonight. Have you been informed?" Mr Kostakos said "No. I have not been notified but I will not be able to attend because my wife is very sick." There is no evidence that Mr Kostakos actually had been notified of the meeting, with four days' notice or at all. 20 It is the evidence of the first plaintiff Mr Kaplantzis that there were a number of Committee meetings between 17 January 2000 and 28 February 2000. He said "For example the Committee met on the evenings of Thursday 10 February 2000 and Tuesday 15 February 2000." As I understand his evidence there was also a meeting on or about Monday 21 February to make preparations for a dinner dance held on Saturday 26 February. It was his evidence that "The usual practice of the Committee (which was almost always followed) was to meet on the Monday evening following a dinner dance to finalise the accounts and other matters arising from the dinner dance." He gives as an instance that the meeting on Monday 17 January 2000 followed a dinner dance on Saturday 15 January 2000. I understand from his evidence, and from the conduct of the plaintiffs' case overall, that there was no resolution or decision taken by the Committee on 21 February, or on any earlier occasion, that there would be a meeting on 28 February, and that no explicit notice was given to anybody that there was to be such a meeting. 21 The only evidence of an arrangement for a meeting to be held on 28 February is that, according to Mr Kaplantzis' evidence, he spoke during the meeting of 21 February of a meeting which he assumed was to be held on 28 February after the Dinner Dance. It seems that it was regarded by Mr Kaplantzis, and by some other members but not by all other members, as a matter of ordinary routine that there would be a meeting on the Monday evening following a dinner dance. No notices were given of the meeting of 28 February 2000 to Committee members: it seems that Mr Kaplantzis and Mr Cofinas, who was the Secretary, assumed that all members would know there was to be a meeting because that was the routine. Evidence called for the plaintiff, including evidence of Mr Cofinas, did not establish in any clear way that a decision was made on 21 February to appoint a meeting for 28 February 2000. There was no evidence that any notice was given to Mr Diakogiannis, Mr Sidirourgos, Mr Himonitis and Mr Kostakos. Mr Diakogiannis, Mr Sidirourgos and Mr Himonitis gave evidence that they were not aware, until 28 February, that there was to be a meeting that day. There is no evidence of a decision at any earlier meeting that a meeting would be held on 28 February. 22 An arrangement like this would be effective if it worked, that is, if the Committee members actually convened themselves into a meeting without objecting to the lack of a clear appointment and the lack of notice; but if they did not do so, it could not be said that a member who did not attend was in need of leave of absence, or was at risk of vacating office if he did not attend on two consecutive meetings which occurred without any appointment and without any notice. 23 The evidence shows that Mr Kostakos did not attend the meeting on 17 January 2000, or any other meeting up to and including 28 February 2000. 24 In my finding, there was not on or before 28 February any decision to the effect that Mr Kostakos had vacated office, it has not been proved that there were grounds for any such decision, he was in office on 28 February as a member of the Committee, and he continued thereafter to hold office. Accordingly he should be included in the calculation of the number of members for a quorum. When he is so included, there were eleven members on the Committee, seven members did not form a quorum, they were not a duly convened meeting under Article 62, and they had no power to act for O Lycourgos. 25 The Minutes of the Meeting of 28 February 2000 are in the Greek language and I act on a translation in evidence. There are internal inconsistencies in the Minutes. They do not appear to show events in the order in which they happened. They do contain, early, the following statement: "Present at the meeting were all the Committee members with the exception of Mr A. Kostakos." The Minute includes a list of the persons present; according to the practice of O Lycourgos all Committee members present should sign the Minutes but in fact only seven of the ten persons listed signed them. The passage in the translation dealing with this is as follows: The meeting concluded at 10.45 p.m. The Acting President St. Leriou Signed The General Secretary Kostas Kofinas Signed The Treasurer Kostas Kondos Signed First Vice President Geor. Diakoyiannis Committee Member Christos Himonitis Committee Member Ioan. Sidirourgos Committee Member Dim. Manoliadis Signed Committee Member Ant. Christou Signed Committee Member Stavros Gargalianos Signed Committee Member Mik. Kaplantzis Signed Mr Geor. Diakoyiannis, although present, declined to sign the minutes of the meeting. 26 There is reference to the resignation of the President Mr Kaplantzis in the Minutes and it appears that a written resignation in Greek is in the Minute book (although I cannot read it). It will be recalled that under Article 39 of the Articles of the Federation qualifications of the President of the Federation include that he "… shall not be a member of the Executive Committee of that Brotherhood …". It is not clear to me when his resignation took effect, and it appears to me to be irregular that he is shown as a Committee Member and signed the minutes (and he signed as a Committee Member and not as President). His vote is included in the seven votes which, in the presentation of his case, were put forward as constituting a quorum and as carrying the decision appointing officers of the Federation, including himself as President. It is an anomaly that he was treated as voting on the nomination although for the nomination to be effective it would be necessary that he should no longer be a member of the Executive. 27 After referring to other business the Minute says the following: Following this, the Second Vice-president Mr. Leriou, acting as Secretary, repeatedly asked for elections to be held for the Executive, as they had been postponed on many occasions. After this, Mr Kontos nominated Mr. Mih, Kaplantzis as a candidate for the presidency, with seconder Mr. Dim. Manoliadis. Immediately Messrs. Geor. Diakoyiannis, Ch. Himoniatis and Ioan. Sidirourgos left the meeting as they disagreed on the matter, ignoring the majority of the Committee which considered their attitude unacceptable and completely lacking consideration. In the absence of any other nominations for the presidency of the Federation, the candidate Mr. Mih. Kaplantzis was confirmed as President of the Federation of Samian Brotherhoods of Australia (SOA) for the period 2000-2002, when the activities of the Samian Organizations will take place in Sydney. 28 That is to say, the Minutes, signed by seven of those who according to the Minutes were present, including both plaintiffs, clearly say to the effect that three of the persons present Mr Diakogiannis, Mr Himonitis and Mr Sidirourgos left the meeting immediately after Mr Kaplantzis was nominated and seconded as a candidate for Presidency and before a decision was taken confirming him as President. The Minute goes on to record a further decision electing three other officers of the Federation including Mr Lerios the second plaintiff; and the terms of the Minute altogether unmistakably show that that event happened after the three persons mentioned had left the meeting. There is a conflict of affidavit and oral evidence about whether this actually represents the true course of events. 29 The three persons who left the meeting give evidence which, with only very minor variations, confirms that they left the meeting, leaving it without a quorum, before any decision was taken on the nomination of Mr Kaplantzis for election as President of the Federation and also before any decision was taken on the nomination of Mr Lerios for election as Vice President of the Federation. The plaintiffs' evidence gives a different account. In all accounts, Mr Himonitis left third, not second as shown in the Minutes. In Mr Himonitis' evidence however he left very soon after the other two, and before any decision had been taken on the nomination. 30 With one exception, the witnesses who dealt with the order of business in their affidavits were cross-examined and very largely adhered to their positions. The exception was Mr Sidirourgos, who was ill, and could not be cross-examined. I am left with a conflict of evidence, and no clear basis upon which to resolve it, as in no case was the evidence or the credit of the witness impugned in a clear or unmistakable way. In my view the best evidence and the evidence on which I should rely is the Minute, prepared soon after the events and signed by seven persons including the plaintiffs, which establishes that the order of events was that the three persons left before a decision was reached, so that it is clear that a quorum was not present, even if Mr Kaplantzis were to be included in the reckoning of a quorum. There is an incidental dilemma; if Mr Kaplantzis was eligible to vote his election as President would not be effective; if he was not a Committee member and was not eligible to vote because he had resigned, it would be even clearer that there was no longer a quorum, as there would be ten members, the quorum requirement would be seven, and only six remained. 31 It will not in all circumstances be possible for persons attending at a meeting for which a quorum is required to prevent any effective decision by leaving the meeting and reducing the numbers in attendance below the quorum. It is shown by the decision in Ball v. Pearsall (1987) 10 NSWLR 700 (Young J) that a person who deliberately withdraws from a meeting so as to remove the quorum may not rely upon that loss of quorum in seeking relief. 32 The rule stated by Young J at 705 was:- If the rule is, as I have indicated, that provided by the consensual compact, the parties have provided that there should be a quorum at meetings, a quorum must be present throughout the meeting, with the exception that if a person improperly withdraws from a meeting so as to remove the quorum he will not be allowed to allege that a quorum has been lost, it would seem to me to follow in this case that the election is invalid. 33 Ball v. Pearsall related to an unincorporated association but the authorities upon which Young J acted, at 704, relate to incorporated bodies, and the rule stated by Young J has effect in the present case. 34 In this case the three persons who withdrew from the meeting have not asked the Court to make any order, and they are not parties to the proceedings, and any difficulties which they might personally face if they sought the Court's decision are not difficulties for the defendants. This case is not within the exception. What is in dispute in this case is of wider importance than the impact of decisions taken in their absence on the three persons who withdrew; what is now important is what, objectively, is the effect of the events and purported decisions as decisions binding O Lycourgos and the Federation. 35 It was contended that I should make an order under s.1322 of the Corporations Act 2001 so as to overcome procedural irregularities. The deficiencies are far too great for it to be appropriate to act under that section, for reasons stated in paragraphs 4, 11 and 12. The deficiencies cannot be classified as procedural irregularities; they run too deep. For the reasons stated in para.4, a discretionary decision in favour of the plaintiffs under that section would not be appropriate. 36 The plaintiffs have failed on the issues I set out at paras 7 and 8. 37 My Order is: Give judgment for the defendants with costs. ******** Last Modified: 12/13/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.