Reported Decision : 47 ACSR 428 New South Wales Supreme Court CITATION : Sutherland v NRMA [2003] NSWSC 829 revised - 15/09/2003 HEARING DATE(S) : 4 September 2003 JUDGMENT DATE : 4 September 2003 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Provisions imposing age restriction on election of directors removed from constitution CATCHWORDS : CORPORATIONS - constitution and legal capacity - amendment of constitution to remove provisions oppressive to unfairly prejudicial or unfairly discriminatory against a member or members - CORPORATIONS - miscellaneous cases - oppression - circumstances in which provision in constitution which is oppressive to, unfairly prejudicial, or unfairly discriminatory against a member can be removed - effect of repeal of statutory provision limiting circumstances in which persons of a particular age can be directors of a corporation, on whether provision of a corporate constitution is oppressive to, unfairly prejudicial or unfairly discriminatory against a member or members - CORPORATIONS - management and administration - directors - age restrictions on election - DISCRIMINATION LAW - age restrictions on election of directors - removal from company's constitution under section 233 Corporations Act LEGISLATION CITED : Corporations Act 2001 (Cth) Corporations Law Fraser v NRMA Holdings Ltd (1995) 127 ALR 543 CASES CITED : Re Ingleburn Horse and Pony Club Ltd and the Companies Act [1973] 1 NSWLR 641 Australian Securities Commission v Multiple Sclerosis Society of Tasmania (1993) 10 ACSR 489 Quinlan v Fiboze Pty Limited (1998) 6 ACLC 993 PARTIES : Douglas William Sutherland - Plaintiff National Roads and Motorists' Association Limited - Defendant FILE NUMBER(S) : SC 4693/03 COUNSEL : D A Smallbone - Plaintiff J McCarthy QC; J Oakley - Defendant SOLICITORS : Maurice May & Co - Plaintiff Corrs Chambers Westgarth - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST CAMPBELL J FRIDAY 5 SEPTEMBER 2003 4693/03 DOUGLAS SUTHERLAND v NATIONAL ROADS AND MOTORISTS' ASSOCIATION JUDGMENT – Ex Tempore 1 HIS HONOUR: This is an application which is brought by Mr Doug Sutherland. Mr Sutherland is a member of the National Roads and Motorists' Association, the defendant in this case, which I will refer to as the NRMA. 2 The NRMA is a company limited by guarantee. Its affairs are governed by a Constitution which includes provisions for the appointment and removal of directors. Mr Sutherland is presently aged seventy years and will turn seventy-one on 23 September 2003. 3 Mr Sutherland came to see an advertisement in the Sydney Morning Herald on 26 June 2003, whereby the NRMA sought nominations for six vacancies on its board of directors. 4 He was, it seems, aware that the NRMA had at one stage a provision in its Constitution which limited the ability of people of his age to stand for election. The particular provisions in the Constitution are cl 64A and cl 85A. Those provisions state: "64A A person, including a retiring Director, is ineligible to be a candidate in an election if either that person is aged 71 or more at the close of nominations or that person's 71st birthday is to occur in that year. 85A The office of a Director shall be vacated: (a) if the Director's 72nd birthday is in an odd-numbered year, at the conclusion of the annual general meeting in that year and the vacancy shall be filled, despite rule 81, by the election held during that election period; (b) if the Director's 72nd birthday is in an even-numbered year, at the conclusion of the election period in the preceding year. 5 Mr Sutherland wished to nominate as a director of the NRMA. He enquired in July 2003, whether the company's constitutional restrictions on the age of candidates for election as a director, continued to apply. The substance of the reply from the NRMA was that those restrictions did, indeed, continue to apply. 6 The background to the existence of the age restrictions is to be found in the provisions of s 201C of the Corporations Act 2001 and the corresponding previous provision of the Corporations Law (which was at one time s 228). Those provisions imposed restrictions on the ability of a person who had turned seventy-two to be appointed or to act as a director of a public company. 7 The precise restrictions which were imposed under cll 64A and 85A of the NRMA's Constitution were a little more restrictive than was required by the terms of s 201C. The provisions were introduced into the Constitution pursuant to a resolution, concerning which an explanatory memorandum was circulated to members. That explanatory memorandum stated: "At present the Articles do not have a retirement age for Directors. However, under the Corporations Law when a director attains the age of 72 years, the director must retire at the next Annual General Meeting. That director would only be eligible for re-election if the members vote, annually, in favour of his or her re-election by a majority of at least 75% of the votes cast. Under the Articles, the election period does not end until after the Annual General Meeting. This, when combined with the fact that elections will only be held every second year, means that it is logistically difficult to satisfy the Corporations Law preconditions to a Director aged 72 years or more remaining eligible for re-election. The proposed amendments in relation to the retirement age of Directors and age eligibility of candidates will ensure that Directors will have the opportunity to remain in office until near the age of 72 years." 8 Section 201C of the Corporations Act has now been repealed, with effect from 11 April 2003. Clause 64A and cl 85A of the Constitution of the NRMA remain in place. 9 When Mr Sutherland enquired about his ability to stand as a director, the NRMA solicitor informed him that even though s 201C had been repealed, the fact that the clauses of the Constitution were still in place meant that he was ineligible. 10 Thereupon, Mr Sutherland made a complaint to the Anti-Discrimination Board of New South Wales, to the effect that he was being discriminated against on the grounds of age. The Anti-Discrimination Board found that it was unable to resolve the complaint - for the perfectly understandable reason that the NRMA regarded itself as still obliged to operate in accordance with the provisions of its own Constitution - and referred the complaint to the Administrative Decisions Tribunal. 11 The hearing before that Tribunal was set down to occur today. In the course of preparation for that hearing, a new way of resolving the problem, which Mr Sutherland saw himself as faced with, was suggested to him or his legal advisers by the NRMA. That has resulted in an application being made to this Court today. 12 Mr Sutherland's application is one which seeks to invoke the oppression provisions of the Corporations Act, to amend the Constitution of the NRMA to remove the two clauses which impose the age restriction, and make some minor consequential changes. 13 The NRMA has appeared before me today, by Mr McCarthy QC, and has supported the making of the orders which are sought. 14 The relevant legislative provisions are as follows: "232 The Court may make an order under section 233 if (a) the conduct of a company's affairs; or... (c) a resolution...of members...of a company; is... (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or any other capacity. 233(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order: ... (b) that the company's existing constitution be modified or repealed. …" 15 The meaning of "a company's affairs" is explained to some extent by an inclusive definition contained in s 53 of the Corporations Act. Section 53 provides that for the purposes of, amongst other things, s 232 and 233, the affairs of a body corporate include "(c) the internal management and proceedings of the body." "A company's affairs" includes the manner in which it goes about electing directors. 16 The effect of the two clauses in question in the Constitution is to prevent people, simply on the grounds of their age, from being nominated or serving as directors. That is a situation which, at least in some factual circumstances, and in the circumstance where a law which required the making of that type of discrimination has now been repealed, would be one which met the criteria of being oppressive to, unfairly prejudicial to or unfairly discriminatory against a member such as Mr Sutherland who wished to stand. While s 201C continued to apply, it would not have been oppressive, unfairly prejudicial to, or unfairly discriminatory against, a person for a company to act in accordance with s 201C. Before s 201C was repealed, any argument about whether cll 64A and 85A were oppressive, unfairly prejudicial or unfairly discriminatory, would have been confined, in practice, to the extent by which those clauses imposed greater restrictions than s 201C required. That argument would also have been influenced by s 201C(14) of the Corporations Act and s 228(12) of the Corporations Law. The repeal of s 201C significantly changes that situation. 17 In the present circumstances, where no reason is put forward as to why it is not oppressive, unfairly prejudicial, or unfairly discriminatory to apply these clauses, which prima facie appears to meet that description, and in circumstances where the NRMA itself agrees that the clauses, judged as at today, meet the description, it is appropriate to come to the conclusion that the jurisdictional basis provided by s 232 is met. 18 That jurisdictional basis is attracted in two separate ways. The first is under section 232(a) where the NRMA already - and, I might say correctly - has refused Mr Sutherland's nomination because these provisions are in its Constitution. It is perfectly possible for the NRMA to recognise that its action in so doing is oppressive to, unfairly prejudicial to, or unfairly discriminatory against Mr Sutherland, even though its action is one which its Constitution obliges it to take. 19 The second way in which the jurisdiction is attracted is that the resolution which inserted the provisions in the constitution is one which, in the circumstances where s 201C has been repealed, has become one which is oppressive to, unfairly prejudicial to, or unfairly discriminatory against, Mr Sutherland and others of his age. 20 There is evidence that, before Mr Sutherland began these proceedings, the NRMA board had given consideration to the clauses which are the subject of these proceedings. There is already on foot a proposal to put to members a new Constitution to replace the existing Constitution in its entirety. That new Constitution, I am informed, is one which will have no analogue of the provisions about which complaint is made in this case. It had been intended to put that new Constitution to the members of the NRMA at a forthcoming Annual General Meeting. However, the timing of the Annual General Meetings and the election is such that, if the new Constitution were to be adopted at the Annual General Meeting it would not be in time to enable Mr Sutherland to stand as a candidate at the elections which are forthcoming. 21 I have also been informed that there is no objection that is known to the Board, or to the senior executive staff of the NRMA, to the orders which are sought by Mr Sutherland. 22 There is no problem about applying the oppression provisions to a company limited by guarantee: Australian Securities Commission v Multiple Sclerosis Society of Tasmania (1993) 10 ACSR 489; Re Ingleburn Horse and Pony Club Ltd and the Companies Act [1973] 1 NSWLR 641; Fraser v NRMA Holdings Ltd (1995) 127 ALR 543 at 564-5. There is express power in s 233(1)(b) to make an order modifying the Constitution of a company. Nor is there any difficulty with making an order by consent under the section. As Young J pointed out in Quinlan v Fiboze Pty Limited (1998) 6 ACLC 993 many oppression cases are ones where, at least ultimately, orders are made by consent, when the case settles. 23 I shall, therefore, make the orders which are asked for. 24 I make orders in accordance with the short minutes of order which I initial and date today's date and place with the papers. These orders may be entered forthwith. ********** Last Modified: 09/17/2003 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.